BOFIT Weekly Review 2015/12
CBR cuts key rate to 14 %
Last Friday (Mar. 13), the Central Bank of Russia cut its key rate one percentage point on the heels of its February lowering to 15 %. With risks of weaker economic growth still larger than inflation risks, the CBR noted the decision is for supporting the economy.
The weak economy dampens inflationary pressures, and the CBR cited the fact that inflation had slowed from nearly 4 % m-o-m in January to just over 2 % in February. February prices, however, were still up 16.7 % y-o-y. The central bank further observed the price surge at the turn of the year was of a transient event that reflected the double-whammy of a large drop in the value of the ruble and bans on imported goods. The CBR said it expects 12-month inflation to slow by the end of this year to a range of 12–14 % and further to 5.5–7.5 % by the end of 2016. However, this scenario was subject to threats from hikes in regulated energy prices, relaxation of fiscal policy and acceleration in the rise of nominal wages.