Russian central bank slashes key interest rate again

RUSSIA'S central bank on Friday (Apr 29) said it was cutting its key interest rate for a second straight time as risks of price rises and financial instability were no longer rising. The Bank of Russia said it was slashing the rate from 17 per cent to 14 per cent from next week, a greater cut than predicted by many analysts. It said this was because "price and financial stability risks (are) no longer on the rise". The central bank had cut the interest rate to 17 per cent earlier this month saying that risks to financial stability had "ceased to increase" for now. This followed an emergency hike to 20 per cent in late February, 4 days after the start of Moscow's military action in Ukraine. This came after Western nations imposed sanctions that largely cut Russia's financial sector off from the global economy. Analysts surveyed by Russian media had largely predicted a 15-per cent cut for the latest rate decision. The central bank nevertheless struck a cautious note, saying the country's economy faces a "challenging" situation due to sanctions and could see a sharper decline than its base scenario predicts. The bank said that imports to Russia are declining more markedly than exports, due to external trade and financial restrictions. It released a baseline forecast for this year for imports to fall by up to 36.5 per cent and exports by up to 21 per cent. The central bank said Friday that while still high, current growth rates of consumer prices have "slowed significantly after they peaked in the first half of March". It said this was due to a "strengthening of the rouble and a cooling of consumer activity". The rouble plunged to historic lows against the dollar and the euro in March, from which it has since rebounded. The central bank predicted that inflation would continue to grow in the coming months. Annual inflation reached 17.6 per cent as of April 22, it said, and could hit 23 per cent this year before slowing next year. The bank has set an inflation target of 4.0 per cent, and vowed Friday its monetary policy "will ensure a return of inflation to target in 2024". Ratings agencies have downgraded Russia and warned that payments of dollar-denominated debt in local currency would constitute a sovereign default, the country's first in decades. Central bank governor Elvira Nabiullina was set to give a press conference later on Friday. The next meeting to discuss a rate change will be June 10, as the bank said it sees room for further rate reduction this year. AFP