MOSCOW: The central bank of Russia lowered interest rate to 15% from 17% on belief that the current inflation which surged to 13.1% annually, is of a short-term character.
The board of directors of the central bank has decided to reduce the key rate to 15% annually from 17% on January 30, 2015, taking into account a change in the balance between the consumer price growth and the risks of economic cooling,” it said.
“The inflation rise was caused by an accelerated adaptation of price to the ruble devaluation which occurred earlier and it is limited in time.”
Chairwoman Elvira Nabiullina said that banks will be able to restart giving loans to the real sector at the new key rate. “The key rate decrease by 2 percentage points will give an opportunity to launch real sector crediting, which is one of the anti-crisis plan goals.”
The new interest rate is high enough to rein in inflation and allow the central bank to meet its middle-term inflation goals, she said.
The central bank has changed its earlier forecast, now saying that inflation will peak in April–June instead of March–April. In January 2016, annual inflation will be below 10%, the central bank said.
Consumer activity will remain subdued because of low real wages and retail loan growth slowdown; fixed capital investments will fall in the near future because of high prices for imported goods of investment value, corporate financial performance deterioration and limited access to long-term borrowing.
Industrial output will fall significantly. All these factors have made the central bank forecast a 3.2% gross domestic product decrease in January–June 2015.
