CBR slashes key rate by further 300 bps to 11% per annum

MOSCOW. May 26 (Interfax) - The Central Bank of Russia (CBR) Board of Governors at an unscheduled meeting on Thursday made a decision to reduce the key rate by 300 bps to 11% per annum, the regulator said in a statement.

This is the third rate reduction in a row in such a step: on April 8 it was lowered to 17%, while on April 29 it went down to 14%. On February 28, the Central Bank sharply raised its key rate from 9.5% to 20% per annum in response to the growth of devaluation and inflation risks. In March, the regulator kept it at 20%.

The CBR pointed to a significant slowdown in current price growth rates. "Inflationary pressure eases on the back of the ruble exchange rate dynamics as well as the noticeable decline in inflation expectations of households and businesses," the regulator said.

Funds continue to flow into fixed-term ruble deposits while lending activity remains weak. This limits proinflationary risks and makes it necessary to ease monetary conditions.

External conditions for the Russian economy are still challenging, considerably constraining economic activity.

"Financial stability risks decreased somewhat, enabling a relaxation of some capital control measures," the CBR said.

The regulator is holding open the prospect of key rate reduction at its upcoming meetings.

The CBR's board of governors will hold its next meeting on June 10, 2022.