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Russia trims interest rate on steady inflation decline

Xinhua, April 28, 2017 Adjust font size:

The Russian central bank lowered its key interest rate by half a percentage point to 9.25 percent on Friday, citing the alleviation of inflationary pressure.

Inflation is moving toward the target of 4 percent for 2017 and the economy is recovering, said the bank in a statement.

The bank cut its interest rate by half a percentage point to 10.5 percent in June 2016 in a first reduction since August 2015, and further cut the rate to 10 percent in September 2016 and to 9.75 percent last month.

In the statement, the bank said it expects Russia's inflation to decline to 4 percent before the end of 2017 and stay around this level in 2018-2019.

Inflation fell to 4.3 percent in March from 4.6 percent in February, while it was estimated at 4.2-4.3 percent as of Monday, the bank said. The rate began to steadily decline last year from a peak of 12.9 percent in 2015.

The bank attributed the healthy trend to the appreciation of the ruble on rebounding oil prices and the persistent interest of foreign investors in Russian assets.

The central bank said that Russia's economy continued to recover in the first quarter this year, thanks to growth in industrial production and better employment situation.

Given the current recovery dynamics and the economy's growing resilience to external factors, the central bank predicted that Russia's GDP will still grow in 2017-2019, even if oil prices decline to 40 U.S. dollars per barrel.

Last month, the bank expected Russia's GDP to grow by 1-1.5 percent this year and by 1-2 percent in 2018-2019.

The Russian economy began to contract in 2014 mainly due to weak oil prices and Western sanctions over the Ukraine crisis.

Official data showed that Russia's GDP fell by 0.2 percent year-on-year in 2016, compared with a 2.8-percent decline in 2015. Endi