The Bank of Russia lowered the key rate to 55 percent

the Situation on the markets has changed dramatically since the last meeting of the Board of Directors of the Central Bank in March, said in a release. To combat the pandemic coronavirus significant restrictive measures introduced in the world and in Russia, which adversely affects economic activity. This creates a significant and long-lasting disinflationary impact on prices from aggregate demand, compensating for the effects of temporary proinflationary factors, including falling oil prices, stated in the Bank of Russia.

But the situation on global financial markets stabilized after a period of particularly high volatility in March. The Bank of Russia has revised baseline projections and enters the area of soft monetary policy. Now the Central Bank expects annual inflation in 2020 will amount to 3.8-4.8% and stabiliziruemost close to 4% thereafter.

Also, the Central Bank admitted that will continue the cycle of rate cut at the next meeting. A “soft” signal to investors, which can ensure the flow of funds of non-residents in the Russian public debt and a positive impact on the ruble.

So, since last summer the Bank of Russia lowered its key rate by 2.25 percentage points. The only break in the decline rate of the Central Bank made at the March Board of Directors meeting, when global markets experienced a shock due to the rapid spread of the pandemic coronavirus and deep drop in oil prices caused by the collapse of the deal, OPEC+.

Today’s rate reduction was the most likely scenario – a week ago, hinted the head of the Bank of Russia Elvira Nabiullina. In fact, the intrigue was only the size of a rate cut. Usually the standard step change in the rates for Central Bank – 0.25 percentage points.

the Next meeting of the Board of Directors of the Bank of Russia, which will discuss the level of the key rate will be held June 19, 2020.