The Bank of Russia will possibly cut its key interest rate for the first time in a year at its next meeting on June 14, the regulator’s head Elvira Nabiullina has said, according to Reuters.
Latest data shows “confirms that inflation is evolving tangibly better then we expected,” Bank of Russia Governor Nabiullina said in an interview on Bloomberg TV on Thursday. “Admittedly external conditions turned somewhat more volatile in recent weeks, and we will take into consideration all these factors, but we think that this option of a reduction is possible.”
The regulator is also considering holding the key rate at 7.75% and doesn’t see any need to make “rapid movements,” Nabiullina said. At an earlier panel session on Thursday at the St. Petersburg International Economic Forum (SPIEF), Nabiullina said the regulator is ready to resume monetary easing “in the nearest future” after two pre-emptive hikes last year “had the necessary effect.”
The comments are the strongest signal yet that Russia’s central bank is ready to resume monetary easing as inflation retreats from a spike earlier this year. The market is still divided about the direction of next week’s decision, although forecasts for easing have begun to increase recently.
Fourteen economists in a Bloomberg survey forecast a 25 basis-point cut to 7.5% at next week’s meeting, while four analysts expect no change. On Friday the central bank will enact a self-imposed black-out week during which policymakers can’t comment on rates.
Lowering borrowing costs won’t spur economic growth on its own and Russia also needs to implement reforms to achieve that goal, Nabiullina said on at Thursday’s panel session. Inflation eased to 5.1% in May from 5.2% in April, according to another Bloomberg survey.