Bank of Russia Cuts Key Rate Again amid Slowing Inflation

The Bank of Russia cut its key interest rate to 6.25 percent on Friday as inflation continued to slow, and said it would consider further reductions in the first half of 2020, Reuters reports.

“Inflation slowdown is overshooting the forecast,” the bank said in a statement. “If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate reduction in the first half of 2020.”

Inflation slowed to 3.4 percent as of Dec. 9, the bank said. The regulator added it expected inflation to range between 2.9 percent and 3.2 percent at the end of the year.

“Policymakers will probably want to see just how far inflation falls in early 2020,” Capital Economics said in a note. “With inflation falling to 3.5 percent in November (below the 4 percent target) and likely to drop further in the coming months, we think another 25bp cut at the next meeting, to 6.00 percent, is more likely than not.”

The bank said the GDP growth rate would gradually increase from 0.8-1.3 percent in 2019 to 2-3 percent in 2022.

During a meeting with representatives of European business circles in Russia on Thursday, Economy Minister Maxim Oreshkin said weak consumer demand and low inflation would continue in the first half of next year.

The Bank of Russia board of directors will hold its next key rate review meeting on Feb. 7.