the Central Bank lowers its key rate, 7.50%

The Russian Central Bank slightly lowered its key rate on Friday, bringing it down from 8% to 7.50%, in line with market expectations which had been anticipating such a drop for several days.

After this reduction of 50 basis points, the Russian Central Bank’s key rate returns to the level it had between October and December 2021, far from the threshold reached at the end of February a few days after the launch of the offensive by Moscow troops in Ukraine.

In the crowd of the first Western sanctions, the Central Bank drastically raised its rate from 9.50% to 20%, before making several cuts in recent months, reassured by the country’s macroeconomic indicators.

Momentum in economic activity is better than the Central Bank expected in July, the monetary institution said in a statement to justify its further cut.

The external environment of the Russian economy remains difficult and continues to limit activity considerably, however, noted the Central Bank, noting a strong heterogeneity of trends according to sectors and regions.

The markets had been betting for several days on a decline of 50 basis points.

Russia has reached full employment in recent months, with a stable unemployment rate (3.9% in July), according to the Rosstat statistics agency. And inflation, which soared after the offensive in Ukraine, hitting a twenty-year-old record in April (+17.8% over one year), has since slowed to 14.3% all the same. in August.

The rise in prices has considerably undermined the purchasing power of Russians, who have little savings, and has reduced their domestic consumption. The fall in interest rates is precisely one of the tools used to boost household consumption.

Consumer activity, despite some recovery, remains limited, weighed down in particular by general uncertainty and the reduction in the supply of certain categories of goods and services, the Russian Central Bank stressed on Friday, for which inflation should remain at a high level by the end of the year.