MOSCOW, March 23. /TASS/. The Russian Central Bank lowered the key rate to 7.25% per annum from 7.5% one and a half months after the previous cut.
"Annual inflation remains sustainably low. Inflation expectations are diminishing progressively. The Bank of Russia forecasts annual inflation to be 3-4% in late 2018 and remain close to 4% in 2019. In this environment the Bank of Russia will continue to reduce the key rate and will complete the transition to neutral monetary policy in 2018," the regulator said in a statement.
According to the Central Bank, monetary conditions continue to ease; their disinflationary effect is gradually declining. At the same time, the regulator’s assessment of inflation risks has not changed significantly, save for the risks posed by the labor market. "The dynamics of wages and unemployment create prerequisites for potentially higher inflationary pressure. At the moment, the assessment of the duration and scale of effect of these drivers remains unclear. The Bank of Russia will pay particular attention to the situation in the labor market, including the impact of the dynamics of incomes and wages on consumer behavior and inflation," the statement said.
The growth rate of Russia’s GDP, according to the Central Bank, will reach 1.5-2% in 2018-2020. "The Bank of Russia’s general perceptions of the Russian economy’s growth have remained unchanged. The Bank of Russia has slightly raised the oil price in its baseline scenario. However, it has not entailed any significant review of the Russian economy’s growth rate in the medium term due to its decreased sensitivity to oil price changes and remaining structural constraints. In 2018-2020, GDP will grow by 1.5-2%, which corresponds to the potential growth rate of the economy," the regulator said.
Inflationary expectations in Russia declined in February to new lows - 8.4% from 8.9% in January - against the background of annual inflation of 2.2%. Last week, the Central Bank did not rule out economic growth of 0.4% in January-March 2018 in quarterly terms, and 0.5% in April-June, as well as an increase of the estimate GDP growth for 2017 from the current 1.5%.
The Bank of Russia will continue to reduce the key rate and will complete the transition to neutral monetary policy in 2018, the regulator said in a press release on Friday.
The regulator notes that the board took the decision to cut the key rate considering that annual inflation remains sustainably low.
"In February 2018 it stood at 2.2%. Inflation remains below 4% longer than expected, allowing for a quicker transition to neutral monetary policy this year," according to the press release.