CBR lowered the key rate to 9.25%

At its meeting today, the Russian central bank (CBR) has surprised markets reducing its key rate more than expected by 50 bp to 9.25%.

The CBR said inflation expectations continue to decline, while domestic consumer prices are seen reaching the 4% target at some point before the end of 2017. In addition, the bank noted the economic recovery remains on track.

According to the CBR’s statement, “Inflation slowdown was broadly facilitated by the ruble appreciation amid relatively higher oil prices, persistent interest in investment in Russian assets among external investors, and a drop in the sovereign risk premium”.

Furthermore, “In order to maintain the propensity to save and anchor sustainable inflation slowdown driven by demand-side restrictions, monetary conditions should remain moderately tight”.

Regarding economic growth, the central bank noted “Given the current recovery dynamics and the economy’s growing resilience to the fluctuations in the external economic climate, the Bank of Russia expects that the GDP will grow in 2017-2019 even if the conservative oil price scenario materialises”.