Russia’s central bank says cuts key rate to 5.5% from 6%

MOSCOW, Apr 24 (PRIME) -- Russia’s central bank has reduced the key rate to 5.5% from 6%, revised its basic forecast scenario and is moving into the area of a soft monetary policy, the regulator said on Friday.

The central bank said it may further reduce the key rate at the next meetings of its board of directors. The next meeting of the board is scheduled for June 19.

The regulator expects that annual inflation will amount to 3.8–4.8% in 2020 and will stabilize near 4% in the future.

“Inflation dynamics this year and later will be largely shaped by a deep drop in domestic and foreign demand. Weakening of demand will become a significant disinflation factor, which is associated with the current and delayed economic effects of the restrictions introduced to combat the coronavirus pandemic in Russia and in the world,” the central bank said.

Inflationary expectations of the population and business have increased, but amid declining demand, their change will be short-term.

In March, annual inflation accelerated to 2.5% from 2.3% in February. Under preliminary data, consumer prices grew around 3.1% in annual terms as of Monday.

The central bank projects that gross domestic product (GDP) will fall by 4–6% in 2020 and will start to recover in 2021–2022, with GDP growth seen at 2.8–4.8% in 2021 and 1.5–3.5% in 2022.

The regulator’s basic scenario is based on an average price of the Urals oil blend of U.S. $27 per barrel in 2020 and its gradual increase to $35 per barrel and $45 per barrel in 2021 and 2022, respectively.

The dynamics of economic recovery will significantly depend on the scale and efficiency of measures taken by the government and the central bank to ease the consequences of the coronavirus pandemic, the regulator said.

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