The Central Bank of Russia unexpectedly lowers its key rate to 17% – 04/08/2022 at 16:37

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THE CENTRAL BANK OF RUSSIA SURPRISINGLY LOWERS ITS KEY RATE TO 17%

(Reuters) – Russia’s Central Bank surprised markets by lowering its key interest rate on Friday outside the official schedule, a move that could continue as emergency measures taken after the invasion of Ukraine helped contain the risk to the country’s financial stability.

The central bank said it had cut its key rate from 20% to 17% while its next monetary policy meeting is scheduled for April 29.

It said in a statement that the move reflected a shift in the balance of risks of higher inflation and lower economic activity.

“Risks to financial stability are still present but have stopped increasing for the time being, in particular thanks to the capital control measures adopted. There is a steady inflow of funds,” the bank said.

A few days after the Russian invasion of Ukraine, the central bank raised its key rate sharply, from 9.5% to 20%, to cope with the first Western sanctions against Moscow and the fall of the rouble.

Russia’s annual inflation rate hit its highest since 2015, at 16.70% on April 1.

The external conditions of the Russian economy remain difficult and “significantly constrain economic activity”, the Russian central bank said, while adding that it “keeps open the prospect of a further rate cut in its upcoming meetings. “.

Russian analysts welcomed this early move, saying it demonstrated the central bank’s confidence in the emergency measures taken since Feb. 24.

“The policy rate can probably be cut by another 100-200 basis points in April, but that will require additional positive momentum on inflation and inflation expectations,” said Dmitry Polevoi, head of investments at Locko-Invest in Moscow. .

On the foreign exchange market, the ruble appreciated after these announcements to reach its highest level since June 2020 against the euro and brush against a two-month peak against the dollar.

(Reuters office, French version Laetitia Volga, editing by Sophie Louet)

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