The Central Bank of Russia reduced its key interest rate to 8%

Russia’s central bank cut its key interest rate by a more-than-expected 1.5 points to 8.0 percent on Friday and said it would study the need for further cuts as inflation slows and the economy needs cheaper borrowing as it sinks into recession. .

It was the fourth reduction this year. Immediately after Moscow sent armed forces into Ukraine on February 24, the central bank had raised its key interest rate to 20% from 9.5% in order to reverse the fall in the value of the ruble.

In a Reuters poll earlier this week, most analysts had expected a smaller cut of around 50 basis points.

“The Bank of Russia will consider the need to cut the key interest rate in the second half of 2022,” it said in a statement.

Annual inflation stood at 15.5% on July 15, according to the central bank.

It cut its 2022 inflation forecast to 12-15% from its previous estimate of 14-17%, reiterating its hope that inflation will ease to its 4% target in 2024.

High inflation is reducing living standards and has been a major concern of Russians for years, but the economy needs a boost in the form of cheaper credit to counter the negative effects of sweeping Western sanctions.

The central bank revised its economic forecasts for this year, saying gross domestic product will contract by 4-6%. At the end of April he had said that GDP would shrink by 8-10%.

In 2023, the economy will shrink by 1-4%, the central bank said, revising its previous forecast that the economy would shrink by as much as 3% next year.

Central Bank Governor Elvira Nabiullina will shed more light on the bank’s forecasts and policy in a briefing she will hold at 15:00 Greek time.

The next rate-setting meeting is scheduled for September 16.