CBR lowers key rate to 18% per annum
MOSCOW. July 25 (Interfax) - The board of directors of the Central Bank of Russia has made the decision to once more lower the key rate by 200 basis points (bp) from 20% to 18% per annum.
This decision is in line with the expectations of most analysts, who forecast that the bank would lower the rate. Some predicted a larger decrease of 300 bp to 17%, while others believed that a smaller decrease of 100 bp to 19% was possible.
At the previous meeting on June 6, the board took the decision to lower the key rate for the first time in over two and a half years, by 100 bp from 21% to 20%. Prior to this, the bank last lowered the key rate from 8% to 7.5% in September 2022.
"Current inflationary pressures, including underlying ones, are declining faster than previously forecast. Domestic demand growth is slowing. The economy continues to return to a balanced growth path," the CBR said in a press release after the board meeting on Friday.
The CBR also said that proinflationary risks prevailed over disinflationary risks in the medium term. As before, key proinflationary risks were linked to the longer upward deviation of the Russian economy from a balanced growth path, as well as high inflation expectations and deteriorating conditions for foreign trade.
"A further decrease in the growth rate of the global economy and oil prices in case of escalating trade disputes may have proinflationary effects through the ruble exchange rate dynamics. Geopolitical tensions remain a significant uncertainty factor. Disinflationary risks involve a more significant slowdown in lending growth and domestic demand under the impact of tight monetary conditions," the press release reads.
The CBR held the rate at 21% over four consecutive meetings until June, having raised it by 200 bp from 19% on October 25, 2024. At its meeting on December 20, 2024, it took the decision to keep the rate at this level, although most analysts had predicted an increase. The bank held the rate at 21% on February 14, March 21 and April 25.
The CBR board of directors will hold its next rate meeting on September 12.
