Russian central bank says cuts key rate to 7.5% from 7.75%

MOSCOW, Feb 9 (PRIME) -- The Russian central bank has reduced the key rate to 7.50% annually from 7.75%, the authority said in a statement on Friday.

“Annual inflation remains at a sustainably low level. Inflation expectations are gradually decreasing,” the statement said.

“Short-term pro-inflation risks have weakened. Because of this, the balance of economic and inflation risks has somewhat shifted towards risks for the economy. Uncertainty on the global financial markets has strengthened. Chances of annual inflation exceeding 4% this year have fallen significantly.”

Annual inflation amounted to 2.2% in January. The influence of constant factors on deceleration of inflation might be stronger than expected – a growing supply of food pushes consumer prices down but this factor will disappear by July, while rising investment in agriculture creates preconditions for growth of production capacities. Inflation expectations are decreasing though unevenly.

Short-term inflation risks have decreased. The risk of inflation exceeding 4% in 2018 has decreased significantly. Inflation is to remain close to the level of 2019. Budget policies are to soften any effect from changes in the oil prices. Changes on the labor market and in the consumer patterns as well as inflationary expectations, can boost inflation.

The central bank’s estimate for medium-term risks remained virtually unchanged. Pro-inflation risks are still stronger than the anti-inflation risks in 2019–2020.

Economic activity slowed down in October–December 2017 but the reasons behind the trend have not been fully discovered.

In these conditions, the central bank will continue reducing the key rate and does not rule out switching to a neutral credit policy from a moderately restrictive one in 2018.

End