Russia Lowers Key Rate By 25 Bps
23 March 2018 - 7:12PM
RTTF2
Russia's central bank decided to cut its key rate by a quarter
point, amid below-target inflation, and signaled more reduction
this year.
The Board of Directors of the Bank of Russia trimmed the key
rate to 7.25 percent from 7.50 percent. The bank had lowered the
rate by 25 basis points in February.
The bank said it will continue to reduce the key rate and
complete the transition to a neutral monetary policy in 2018 as
inflation remains below 4 percent for a longer time than previously
estimated. Inflationary expectations are gradually decreasing, the
bank observed. Annual inflation is expected to be 3-4 percent at
the end of 2018 and close to 4 percent in 2019.
The gradual return of inflation to the target will contribute to
the further recovery of domestic demand, the bank said.
"The decision made at the key rate and the potential for its
subsequent reduction will further mitigate monetary conditions,
which will support the growth of domestic demand and create
conditions for annual inflation to approach 4 percent," the bank
said.
Policymakers said they will pay special attention to the
situation in the labor market, including assessing the impact of
income and wage dynamics on consumer behavior and inflation.
The GDP growth rate is forecast to be in the range of 1.5-2
percent in 2018-2020, which corresponds to the potential rates of
economic growth.
The policy rate will be lowered to 6.00 percent by the end of
this year, which is a little lower than the markets are pricing in,
William Jackson, an economist at Capital Economics, said.
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