Russian central bank cuts key rate to record low of 4.25pc

MOSCOW: Russia's central bank lowered its key interest rate to a record low of 4.25pc on Friday and said it would consider the need for further monetary easing amid low inflation and a shrinking economy.

The 25-basis-point cut was in line with a Reuters poll that forecast Russia would trim the cost of lending for a fourth time this year to address an economic crisis triggered by COVID-19 and related lockdowns.

"If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate reduction at its upcoming meetings," the central bank said.

The bank also revised its economic forecasts.

It now expects gross domestic product to shrink by 4.5-5.5pc this year before returning to growth in 2021.

The central bank had previously forecast a GDP contraction of 4-6pc this year.

Annual inflation was close to 3.3pc as of July 20, remaining below the central bank's 4pc target.

"According to the Bank of Russia's forecast, given the current monetary policy stance, annual inflation will reach 3.7-4.2pc in 2020, 3.5-4.0pc in 2021 and will stand close to 4pc later on," it said.

The rouble eased slightly to 71.60 against the US dollar after the rate cut, compared with levels of 71.56 seen shortly before the monetary policy decision.

Elvira Nabiullina, governor of the central bank, will shed more light on the central bank's forecasts and monetary policy plans at an online news conference at 1200 GMT.

The next rate-setting meeting is scheduled for Sept. 18.