MOSCOW: Russia’s central bank cut its key interest rate by a bigger-than-expected 1.5 percentage points to 8.0% on Friday and said it would study the need for more cuts as inflation slows and an economic contraction continues for longer than previously thought.

It was the fourth cut this year. In the immediate aftermath of Moscow’s despatch of armed forces into Ukraine on Feb. 24, the central bank had hiked its key rate to 20% from 9.5% in order to reverse a plunge in the value of the rouble.

Central Bank Governor Elvira Nabiullina said the board had considered three main options: cutting the rate by 50, 100 or 150 basis points, as it aims to bring annual inflation down to its 4% target in 2024, compared with 15.5% recorded in mid-July.

“The potential for further rate decrease remains on the mid-term horizon,” Nabiullina told a media conference as she presented the rate move.

The rouble extended losses, sliding to 58.65 against the dollar after the rate decision, from 57.57 seen shortly before.

“The Bank of Russia has surprised not only us but the entire financial market”, said Yuri Tulinov, senior vice-president of market studies at Rosbank. In a Reuters poll earlier this week, most analysts had expected a cut of 50 basis points from 9.5%.

Lower rates ease upside pressure on the rouble, while making lending cheaper, which Russia needs to limit the depth of its economic recession triggered by sweeping western sanctions.

“The data we are receiving suggest that the economic decline will be more extended over time and, possibly, will become less deep,” Nabiullina said.

After growing 4.7% in 2021, the economy is now on track to shrink 4%-6% this year, the central bank’s revised forecasts showed.