30 Jan 2015
Russian central bank cuts key rate to 15 percent
FXStreet (London) - Announced this morning, the Bank of Russia Board of Directors decided to reduce the key rate from 17.00 to 15.00 percent citing a shift in the balance of risks of accelerated consumer price growth and cooling economy.
The decision to dramatically raise the key rate taken by the Bank of Russia on 15 December 2014 resulted in stabilisation of inflation and depreciation expectations to the extent the Bank of Russia expected. The current surge of inflation is driven by the accelerated price adjustment to the ruble depreciation being time-limited. Further the inflation pressure will be contained by decrease of economic activity. According to Bank of Russia forecast, consumer price growth will be lower than 10 percent in January 2016.
According to the CBR, current monetary conditions set the ground for inflation decline in the medium run. Annual money supply (M2) growth rate decreased considerably. Significant growth of interest rates on household deposits will stimulate the propensity to save and increase the attractiveness of deposits. Given lending rates hike and tighter borrower and collateral requirements, lending growth (adjusted for currency revaluation) slowed down.
The decision to dramatically raise the key rate taken by the Bank of Russia on 15 December 2014 resulted in stabilisation of inflation and depreciation expectations to the extent the Bank of Russia expected. The current surge of inflation is driven by the accelerated price adjustment to the ruble depreciation being time-limited. Further the inflation pressure will be contained by decrease of economic activity. According to Bank of Russia forecast, consumer price growth will be lower than 10 percent in January 2016.
According to the CBR, current monetary conditions set the ground for inflation decline in the medium run. Annual money supply (M2) growth rate decreased considerably. Significant growth of interest rates on household deposits will stimulate the propensity to save and increase the attractiveness of deposits. Given lending rates hike and tighter borrower and collateral requirements, lending growth (adjusted for currency revaluation) slowed down.