Russian central bank cuts key rate to 8.25 percent

By Andrey Ostroukh and Jack Stubbs

MOSCOW (Reuters) – The Russian central bank cut its key rate to 8.25 percent from 8.5 percent on Friday and said further cuts were likely in coming months.

Friday’s cut was in line with market expectations. Sixteen of 20 analysts and economists polled by Reuters had predicted the central bank would lower its key rate by 25 basis points .

The central bank said it would consider cutting the key rate further as inflation has slipped below its 4 percent target to 2.7 percent in annual terms as of Oct. 23.

“The Bank of Russia Board of Directors leaves open the option of further rate reduction at its upcoming meetings,” the central bank said in a statement.

Inflation has slowed faster than expected this year largely thanks to booming agriculture production and the central bank’s tight monetary policy.

The slowdown in inflation was also driven by the stronger rouble, the central bank said.

“Moving forward, the Bank of Russia’s key rate decisions will be based on its assessment on the balance of risks for inflation significantly and persistently deviating in either direction from the target, as well as consumer price movements and economic activity against the forecast,” it said.

The central bank has previously said it aims to bring the key rate down to 6.5-7 percent in 2019 due to the sharp fall in inflation, which has tumbled from around 17 percent in early 2015.

The central bank said it had also confirmed its economic outlook. Last month, the central bank said it expected gross domestic product to grow by up to 2.2 percent in 2017.

The rouble briefly firmed to 58.00 versus the dollar compared with a level of 58.14 shortly before the rate decision.

The central bank’s next rate meeting and a news conference with Governor Elvira Nabiullina is scheduled for Dec. 15.

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