The Russian central bank cut its key interest rate by 25 basic points from 8.50% to 8.25% and said new cuts could be made in the coming months. The new interest rate cuts are possible after inflation fell well below the central bank’s target of 4%, dropping to 2.7% on an annual basis as of October 23. The consumer price rates are stabilizing after in 2015 they were 17%.
This year’s rise in inflation slowed down sharper than expected, largely due to the well-growing agricultural sector and the tight monetary policy of central bankers.
Another reason for the fall in inflation is the stronger ruble.
Earlier, the central bank said the final one was to reduce interest rates to 6.5-7.0% in 2019. The next meeting is scheduled for December 15.
The gross domestic product (GDP) continued to grow in line with estimates while farm and mechanical engineering output, freight turnover and the production of durable consumer goods all increased. The central bank last month increased its forecast for GDP growth this year to 1.7-2.2% from the previous 1.3-1.8%.
However, it did not provide its GDP estimate in the third quarter of this year and official statistics were not yet available. Russia’s GDP rose by 2.5% in the second quarter of this year, up from 0.5% in the first quarter, according to official statistics.