Russia drops interest rate by 1.5% as inflation falls

Friday, Russia central bank slashed its interest rate to 8%, a significant decrease from the previous month’s setting of 9.5%, citing a decline in inflation.

Earlier this year, in an effort to stabilise the rouble following Moscow’s invasion of Ukraine in February, the bank increased the rate to 20%. Since then, it has been progressively reversing the increase, and rates are currently lower than they were just before the invasion.

“Current consumer price growth rates remain low, contributing to a further slowdown in annual inflation,” the bank said in a statement. “Inflation expectations of households and businesses have significantly decreased, reaching the levels of spring 2021.”

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It stated that additional cuts would be considered later in the year.

The bank reported that inflation declined to 15.9% in June from 17.1% in May, with further declines anticipated in July. It anticipates inflation rates of 5% to 7% in 2023 and 4% in 2024.

Analysts polled by Reuters anticipated a rate decrease of 0.5 percentage points, but the reduction was far more.

The bank said it would “consider the necessity of key rate reduction” in the second half of this year. The next meeting is scheduled for 16 September.