The Bank of Russia cut its key rate by 300 basis points to 11%. This was stated on May 26 in a message from the regulator.
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“The Board of Directors of the Bank of Russia decided to reduce the key rate from May 27, 2022 by 300 bp to 11.00% per annum. The Bank of Russia will make further decisions on the key rate, taking into account the actual and expected inflation dynamics relative to the target, the process of economic restructuring, as well as assessing the risks from internal and external conditions and the reaction of financial markets to them.
It is noted that the Central Bank admits the possibility of reducing the key rate at the next meetings. It is known that the next meeting of the board of directors of the bank, which will consider the issue of the key rate level, is scheduled for June 10, 2022.
The Central Bank also spoke about the current economic situation in the country. Thus, according to the latest weekly data, there is a significant slowdown in the current rate of price growth. This is facilitated by the dynamics of the ruble exchange rate, along with a decrease in inflationary expectations of the population and businesses. In addition, the Central Bank indicated that the inflow of funds for fixed-term ruble deposits continues, and lending activity remains low, which limits pro-inflationary risks and necessitates easing monetary conditions.
At the same time, the Central Bank notes that the external conditions for the Russian economy remain difficult. However, risks to financial stability eased somewhat, allowing some capital controls to be eased.
On April 29, the Bank of Russia lowered the key rate from 17% to 14% per annum. Then the regulator noted that the risks to price and financial stability had ceased to grow, which created conditions for a decline.
On April 11, the Central Bank also lowered the key rate from 20% to 17% per annum. The regulator explained this by the fact that, despite the persistence of risks to financial stability, they have ceased to grow, including due to the measures taken to control the movement of capital.
Prior to that, at the end of February, against the backdrop of anti-Russian sanctions and increased volatility in the financial market, the Central Bank, on the contrary, raised the base rate to 20% per annum. Then the Central Bank explained the increase in the rate by saying that it would help maintain financial and price stability and protect citizens’ savings from depreciation.