Central Bank lowered its key interest rate

The Bank of Russia lowered its key rate by 0.25 b.p. to 7.50%. The regulator also made possible further reduction of the key rate on one of the next meetings.

“The slowing annual inflation. In may, inflation expectations and price expectations of the enterprises did not change significantly, remaining at an elevated level. Economic growth in the first half of 2019 is formed below the expectations of the Bank of Russia. In comparison with March preinflation short-term risks have declined. In these conditions, taking into account the monetary policy the Bank of Russia lowered the forecast of annual inflation by the end of 2019 from 4.7-5.2 to 4.2-4.7 percent. Further, according to the Bank of Russia, annual inflation will remain near 4%,” — said in the press release of the Central Bank.

“With the development of the situation in the baseline forecast, the Bank of Russia admits the possibility of a further reduction in the key rate on one of the next meetings of the Board of Directors and the transition to a neutral monetary policy until mid-2020. The Bank of Russia will make decisions on the key rate based on the actual and expected dynamics of inflation relative to the target, the development of the economy in the forecast horizon, as well as assessing the risks from the internal and external environment and the reaction of financial markets”, — noted in the Bank of Russia.

As mentioned earlier, experts have almost no doubt about it. Most economists surveyed by Bloomberg had expected that the bar will fall by a quarter b.p. In addition, some experts pointed out that this will be a signal for further easing of monetary policy. And this should cause a new wave of demand for Russian assets.

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