MOSCOW, October 27. /TASS/. The board of directors of Russia’s Central Bank decided to cut the key rate by 25 basis points to 8.25% per annum at the meeting on October 27, 2017, the regulator reported Friday.

The board notes that inflation holds close to 4%. Its downward deviation against the forecast is driven mainly by temporary factors, the regulator said, while the economy continues to grow.

The regulator left open the option of further rate reduction at its upcoming meetings. It also noted a gradual transition from moderately tight to neutral monetary policy.

Moving forward, the key rate decisions will be based on its assessment on the balance of risks for inflation significantly and persistently deviating in either direction from the target, as well as the dynamics of economic activity against the forecast, the report said.

Estimates as of 23 October 2017 indicate that annual inflation is 2.7%, the Central Bank said. Inflation is projected to be close to 3% by late 2017.

"Going forward, as the temporary factors run their course, it will approach 4%. Inflation expectations remain elevated. Their decline has yet to become sustainable and consistent," the regulator said.

The bank leaves open the option of further rate reduction at its upcoming meetings. Moving forward, the Bank of Russia’s key rate decisions will be based on its assessment on the balance of risks for inflation significantly and persistently deviating in either direction from the target, as well as the dynamics of economic activity against the forecast, the report said. 

The report says the bank will continue moving gradually from moderately rigid to neutral monetary policy. "Given the balance of risks for inflation the Bank of Russia’s ongoing transition from moderately tight to neutral monetary policy will be gradual," the regulator said.

"The Bank of Russia’s estimate of the economic development path throughout 2017 and in the medium term has remained unchanged," the regulator said.

At the same time, "Q3 GDP growth continued in line with the forecast. Farm output increased while mechanical engineering output, freight turnover and the production of durable consumer goods all showed a positive trend. The recovery in consumption is becoming steadier. Consumer demand is shored up by real wage growth driven by inflation slowdown. Unemployment is at a level at which it does not affect inflation."

The Central Bank forecasts GDP growth in Russia in 2017 in the range of 1.7-2.2%. In the future, the GDP growth rate above 1.5-2% per year will be achievable with structural transformation, the regulator said.

The Bank of Russia board of directors will hold its next rate review meeting on December 15, 2017.