Research Reports

Russian central bank cuts interest rate to 17% without waiting for regular meetings Considering inflation and economy

The Central Bank of Russia cut the policy interest rate from 20% to 17% on the 8th. In light of the difficult economic situation, the company decided to cut interest rates by 3 percentage points without waiting for the regular meeting on the 19th, indicating the possibility of further rate cuts.

The central bank explained in a statement, “A decision that reflects the change in the balance between the risk of accelerating consumer price inflation and the risk of slowing economic activity, and the risk of financial stability.” Open to the possibility of additional rate cuts in the future. “

“There is still a risk to financial stability, but it has not increased so far due to the effect of capital regulations. There is a stable inflow of funds into fixed-term deposits,” he said.

Regarding prices, the base effect is expected to accelerate the year-on-year rise, but the current weekly data is slowing down, he said.

Inflation as of April 1 was 16.70% annually, accelerating from 15.66% last week to the highest level since March 2015. The ruble has become unstable due to economic sanctions in the west.

The central bank said, “Although the monetary tightening so far will be partially canceled by the government’s loan support program, the central bank will continue to curb the risk of accelerating inflation.”

Economists, who were expecting a rate cut in June, welcomed the rate cut without waiting for a regular meeting. “We are likely to cut an additional 1-2 percentage points in April, but inflation and inflation expectations need to have a positive effect,” said the investment manager at securities firm Locko-Invest. After that, the interest rate outlook at the end of the year was lowered from 15% or less to 11-12%.

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