Russia Lowers Key Rate By 25 Bps To Record Low

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Russia’s central bank lowered its key rate by 25 basis points to a new record low on Friday and signaled more reductions as the economy is expected to follow a gradual recovery from the downturn caused by the coronavirus pandemic.

The Board of Directors, led by Governor Elvira Nabiullina, decided to reduce the benchmark rate to 4.25 percent from 4.50 percent. The decision came in line with economists’ expectations.

The bank had reduced the rate by 100 basis points in June and by 50 basis points in April.

The bank said it will consider the necessity of further key rate reduction at its upcoming meetings.

Disinflationary factors continue to exert considerable influence on inflation, the bank observed.

According to the board, there is a risk that in 2021 inflation might deviate downwards from the 4 percent target. A significant easing of monetary policy since April was aimed at curbing this risk and stabilizing inflation close to 4 percent.

Given the current monetary policy stance, annual inflation is forecast to reach 3.7-4.2 percent in 2020, 3.5-4.0 percent in 2021 and will stand close to 4 percent later on.

Driven by monetary easing and regulatory measures, the economy is forecast to expand 4.5-5.5 percent in 2020.

Thereafter, GDP is expected to follow a recovery path with growth predicted to total 3.5-4.5 percent in 2021 and 2.5-3.5 percent in 2022.

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