MOSCOW: Russia’s central bank on Friday cut its key rate for the first time since September and raised the possibility of further cuts as the economy recovers.
The central bank announced the cut to 9.75 percent from 10 percent after a regular meeting on monetary policy. Econo-mists had been divided on whether to expect a rate cut.
The central bank last cut its interest rate by half a percentage point to 10 percent in September.
The cut comes as the “inflation slowdown overshoots the forecast, inflation expectations continue to decline and eco-nomic activity recovers,” the central bank said.
It said inflation had dropped to 4.3 percent from 5 percent in January.
Russia’s target for inflation is four percent this year.
“Inflation risks have slightly dropped but remain elevated. In these circumstances, given the moderately tight monetary pol-icy, the 4% inflation target will be achieved by the end of 2017,” the central bank said.
It said it was considering “the possibility of cutting the key rate gradually” in the second and third quarters.
Some economists had expected the status quo to continue while others had predicted a softening of the very restrictive monetary policy followed by the central bank since the ruble collapsed at the end of 2014.
A number of key indicators improved recently, favoring a rate cut. The central bank focuses on inflation, which is now approaching the target.
Russia’s economic activity is in sore need of a boost since it is struggling to emerge from two years of recession caused by the slump in the oil price and Western sanctions imposed over Moscow’s actions in Ukraine.
The central bank said that “the pace of economic recovery is higher than expected.”
It said that it expected GDP to grow by 1.5 percent this year after it contracted 0.2 percent in 2016 and 2.8 percent in 2015.