The board of directors of the Bank of Russia has decided to lower the key interest rate by a further 0.5 percentage points to 14.5% per annum. At its peak, the rate stood at 21%.
“The dynamics of domestic demand have moved closer to the capacity for expanding the supply of goods and services. At the same time, indicators of устойчивого price growth have not yet declined and, according to the Bank of Russia, remain in the range of 4–5% in annualised terms. Significant uncertainty remains regarding external conditions and fiscal policy parameters”, the regulator said in a statement.
The baseline scenario предполагает that the average key rate this year will be 14–14.5% per annum, and 8–10% per annum in 2027. The central bank expects annual inflation to fall to 4.5–5.5% this year.
In the first quarter, the regulator noted an increase in inflation. Adjusted for seasonality, inflation reached 8.7%, up from 4.4% in the fourth quarter. Core inflation averaged 6.3%, compared with 5% in the previous quarter. The acceleration in inflation is attributed to a VAT increase and the indexation of regulated prices and tariffs.
The Bank of Russia also noted a slowdown in the Russian economy in the first quarter, while maintaining its overall GDP growth forecast for the year at 0.5–1.5%.
The next decision on the key rate will be taken on June 19.
Russia remains Belarus’s main trading partner, so growth rates and inflation trends in the country affect the Belarusian economy. A lower key rate reduces the cost of credit resources for Russian buyers of Belarusian investment goods. At the same time, the current level of the rate remains relatively high. For comparison, Belarus’s refinancing rate stands at 9.75% per annum.
