Russia Monetary Policy October 2017


Russia: Bank Rossii cuts key interest rate to 8.25%

October 27, 2017

Russia’s Central Bank (CBR) continued with its easing cycle and decided on 27 October to cut the key rate from 8.50% to 8.25%, effective 30 October. The move followed a larger 50 basis points cut in September and was in line with market analysts’ expectations.

The Bank’s decision was driven by favorable price dynamics, which have given the CBR space to ease policy to support an economic recovery. A more stable exchange rate has helped calm price pressures; inflation fell to the lowest rate since the Soviet era in September. However, upside risks to inflation persist, and the recent downward momentum is partly due to temporary factors, leading the Bank to take a cautious approach to lowering the key rate. In the accompanying statement, the Bank emphasized that, “Given the balance of risks for inflation the Bank of Russia’s ongoing transition from moderately tight to neutral monetary policy will be gradual.”

Looking forward, the Bank signaled that it would likely cut the rate again, stating that, “The Bank of Russia Board of Directors leaves open the option of further rate reduction at its upcoming meetings.” The evolution of geopolitical events, food prices and inflation dynamics will be critical to the determination of the Bank’s coming moves.

The next monetary policy meeting is scheduled for 15 December.

FocusEconomics panelists see the key rate ending 2018 at 7.03%. In 2019, panelists see the Central Bank lowering the monetary policy rate further, with a Consensus Forecast of 6.76%.


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