Russia Lowers Interest Rate to 16.5 Percent
(MENAFN) Russia's central bank delivered an unexpected interest rate reduction Friday, slicing 50 basis points to bring the key rate down to 16.5% as the nation's economy demonstrates signs of stabilizing toward balanced expansion.
Financial markets had anticipated the Central Bank of Russia would maintain rates unchanged at 17% during this session.
The benchmark now sits at an 11-month nadir following the fourth straight reduction cycle.
"Underlying measures of current price growth have not changed significantly and remain above 4% in annualized terms," the central bank stated, while noting that inflation expectations persist at elevated levels.
Monetary authorities pledged to sustain conditions "as tight as necessary" to achieve their inflation objective by 2026.
"According to the Bank of Russia's forecast, given the monetary policy stance, annual inflation will decline to 4.0–5.0% in 2026," the institution indicated, attributing upward revisions in the 2026 projection to temporary pro-inflationary factors.
By the latter half of 2026, inflation should reach 4% and remain within that target corridor throughout 2027 and subsequent years, according to projections.
Rate trajectory analysis
The Central Bank of Russia elevated its policy rate to 20% immediately following the Russian-Ukrainian War's commencement.
Rates remained frozen at 16% from late 2023 through July 2024's conclusion, despite four consecutive hikes during 2024.
June marked the initial rate decrease since September 2022, dropping from 21% to 20%, followed by an 18% adjustment in July and a September cut to 17%.
Although annual inflation moderated to 8% in September, the bank maintains its 4% target objective.
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