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Bank of Russia Cuts Interest Rate by 3% and Signals Further Rate Cuts

The Russian Central Bank decided to cut its key interest rate by 3% to 11% and said there was a possibility of further rate cuts this year. The reason is that inflation has slowed from its highest level in more than 20 years and the country’s economy is tending to contract.

Russia’s central bank held a special meeting after cutting its key interest rate to 14% in April, just weeks after deciding to raise rates to 20% if necessary following Russia’s invasion of Ukraine on Wednesday, Feb. 24.

The Russian Central Bank has cut its key interest rate by a total of 9% since February. It said it remains “open to the possibility of a rate cut at the next meeting”.

“Inflationary pressures have begun to diminish with the ruble exchange rate mechanism. It is also a consequence of a sharp drop in inflation expectations from households and businesses,” the Russian central bank said in a statement.

External factors affecting the Russian economy continue to pose a challenge, but risks to financial stability are beginning to recede. This opens up the possibility of a partial relaxation of capital control measures.

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