Russia’s central bank cuts key rate to 7.75% from 8.25%

MOSCOW, Dec 15 (PRIME) -- The board of directors of Russia’s central bank has cut the key rate to 7.75% annually from 8.25%, as extension of the oil production cut agreement depresses inflationary expectations, the regulator said on Friday.

Annual inflation is below 3% mainly under the influence of temporary factors and stood at 2.5% as of Monday, the central bank said.

“Inflation slowdown contributed to a reduction of inflationary expectations, which, however, remains unstable and uneven. Not only further reduction of inflationary expectations, but a reduction of their sensitivity to changes of price conditions is necessary to consolidate inflation around 4%,” the regulator said.

Annual inflation will be below 3% at the end of 2017 and will gradually approach 4% by the end of 2018 as temporary factors are exhausted.

Dynamics of food and oil prices will bear risks for inflation’s deviation both up and down from the target, while the extension of the oil production cut agreement between OPEC and non-OPEC states reduces uncertainty of oil prices and related pro-inflationary risks for a period of one year, the central bank.

Russia’s economic growth will amount to 1.7–2.2% in 2017, the regulator also said. The central bank raised its forecast for the gross domestic product (GDP) growth in 2018 to 1.5–2.0%.

The central bank will continue moving from moderately tight to neutral monetary policy and does not rule out further cutting the key rate in the first half of 2018. The next meeting of the board of directors on the issue is slated for February 9, 2018.

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