Russian central bank trims key rate to 9 percent, pledges more cuts

0
798

The Russian central bank cut its key interest rate by 25 basis points on Friday, pledging more monetary policy easing this year amid a better economic outlook.

The central bank trimmed the key rate to 9.00 percent from 9.25 percent, in the third consecutive cut this year.

A Russian national flag flies above the headquarters of Bank Rossii, Russia’s central bank, in Moscow.

“The Board notes that inflation is close to the target, inflation expectations keep declining, and economic activity is recovering,” the central bank said in a statement.

Analysts had been split between predicting a rate cut of 25 or 50 basis points: Fifteen out of 23 analysts and economists polled by Reuters this week said they expected the central bank to cut the key rate to 8.75 percent.

“The Bank of Russia sees room for cutting the key rate in the second half of 2017. While making its decision hereinafter, the Bank of Russia will assess inflation risks, the inflation dynamics and economic developments against the forecast,” the central bank said.

By the end of the year, the central bank is expected to bring the key rate to 8-8.25 percent, according to a Reuters poll.

The central bank’s monetary policy chief Igor Dmitriev told Reuters this month that market expectations about rate cuts generally matched the bank’s own view.

The central bank said on Friday a possible tax manoeuvre by the government and a recovery in consumer demand carried upside risks for inflation, strengthening the case for prudent easing.

Lower interest rates could support an economic recovery by making lending cheaper, while also depriving the rouble of support from carry trade operations where investors borrow dollars cheaply and buy into high-yielding rouble assets.

The rouble firmed briefly to 57.59 versus the dollar compared with a level of 57.7 seen shortly before the rate decision.

Also on Friday, the central bank increased its economic growth forecast to 1.3-1.8 percent in 2017 from 1.0-1.5 percent growth predicted earlier.

The market will now closely watch a news conference where the bank’s governor, Elvira Nabiullina, will take questions from reporters from 1200 GMT.

Analysts have said the tone of Nabiullina’s rhetoric is likely to be cautious to avoid boosting expectations about further monetary easing.

The central bank’s next rate meeting is scheduled for July 28.

SHARE
Previous articleIMF won’t fund Greek bailout until it gets more clarity on debt restructuring
Next articleIMF’s Lagarde warns the UK against ‘crash’ brexit
Godwin Okafor is a Financial Journalist, Internet Social Entrepreneur and Founder of Naija247news Media Limited. He has over 16 years experience in financial journalism. His experience cuts across traditional and digital media. He started his journalism career at Business Day, Nigeria and founded Naija247news Media in 2010. Godwin holds a Bachelors degree in Industrial Relations and Personnel Management from the Lagos State University, Ojo, Lagos. He is an alumni of Lagos Business School and a Fellow of the University of Pennsylvania (Wharton Seminar for Business Journalists). Over the years, he has won a number of journalism awards. Godwin is the chairman of Emmerich Resources Limited, the publisher of Naija247news.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.