Cautious Central Bank rate cut reflects growing uncertainty and risks, room for monetary easing remains - summary

MOSCOW. May 7 (Interfax) - There is room for key rate reduction but growing uncertainty and inflationary risks must be taken into account, the Central Bank of Russia said in a summary of the key rate discussion at its April 24 board meeting.

"Most discussants agreed there is room for key rate reduction. Keeping the rate at the current level could create risks of the economy overcooling and inflation then deviating significantly downwards from the target," it said.

"At the same time, decision-making must reflect growing uncertainty and inflationary risks, primarily from external conditions and fiscal policy. The cautious rate cut was consistent with this," the Central Bank said, explaining its April decision.

The Central Bank in April decided to cut its key rate by 50 basis points to 14.5% per annum. It kept to wording of its policy signal relatively soft, saying it would assess the need for further key rate reduction at its upcoming meetings depending on the sustainability of the inflation slowdown, the dynamics of inflation expectations and the analysis of risks posed by external and domestic conditions.

The Central Bank said there was a broad consensus among discussants for cutting the key rate by 50 bps. Some advocated holding the rate at 15.0% per annum. All proposed accompanying the decision with a moderately soft signal indicating that the need to for rate reduction would be assessed at upcoming meetings.