Photo: Gabriel Grigorov / TASS
The Bank of Russia at the meeting of the Board of Directors on July 24, decided to reduce the key rate by 25 basis points to 4.25 percent per annum, thus establishing a new historical minimum. The decision of the regulator according to the website of the regulator.
The decision to reduce the key rate due to the risk of departure from target level of price growth in 2020, down, that is, inflation below 4 per cent. This risk the regulator connects with the slowdown in economic activity in the second quarter of 2020, caused by quarantine measures to combat coronavirus. The risk of “lag” from target inflation medium can be maintained until the beginning of 2021.
“Although the easing of restrictive measures on the revival of economic activity, the recovery of the global and Russian economy will be gradual. In these circumstances there is a risk of deviations of inflation down from 4 percent in 2021. Implemented from April, a significant easing of monetary policy aimed at limiting this risk and stabilize inflation near 4 percent,” — stated in the message of Bank of Russia.
The Central Bank predicts that by the end of 2020, the growth of prices in Russia will be in the range from 3.7 to 4.2 percent, and in 2021-m — in the region of 3.5-4 percent. Further decisions on the key rate of the regulator will take depending on the dynamics of inflation, the state of the Russian economy and the emergence of external risks.
Many analysts were expecting the Bank of Russia more decisively to reduce rates — from to 4 per cent per annum, but experts also pointed out that the regulator can play it safe and not make such sudden movements since the previous meeting at which the bet is immediately reduced by one percentage point — from 5.5 to 4.5 percent per annum. The experts noted that the symbolic reduction will help the Central Bank in case of increase of risks and the possible need to change monetary policy. In addition, the industry trend is not showing a single recovery trend, which only adds doubt to the rapid transition to economic recovery. On the same facts stated and the Central Bank in its release.
Video, photo All from Russia.