The Bank of Russia announced a key rate cut by one percentage point at once – up to 4.5%. This is a historical minimum, follows from the data of the regulator.
The Central Bank noted that due to long-term restrictive measures due to coronavirus, disinflation factors “act stronger than previously expected”. The influence of short-term inflationary factors is “largely exhausted”. Risks to financial stability decreased, and inflationary expectations of the population and business decreased.
“Under these conditions, there is a risk of a significant deviation of inflation down from the 4% target in 2021. The decision at a key rate is aimed at limiting this risk and keeping inflation close to 4%”, the report said.
Earlier, Central Bank Chairman Elvira Nabiullina announced the possibility of lowering the key rate by a “more decisive step”, including by 1 pp. She said that a moderate reaction to inflationary expectations allowed in April to switch to a soft monetary policy. According to the forecast of Sberbank, by the end of September, the rate may drop to 4%.
In April, the Central Bank lowered its key rate to 5.5%, in March the rate was kept at 6%, and before that, the rate had been reduced six times in a row since October.