Russia’s central bank said on Friday that it would cut its interest rate to 17 percent, from 20 percent, beginning Monday amid signs that financial stability risks in the country were easing thanks to capital controls.
The unscheduled rate change came after the ruble had regained most of its losses since Russia invaded Ukraine. The central bank said inflation would continue to rise but that recent data had pointed to a slowdown in price increases, in part because of the ruble’s gain. The annual rate of inflation neared 17 percent at the start of April, but weekly the inflation rate slowed to just under 1 percent.
At 17 percent, Russia’s interest rate remains significantly higher than normal. The rate was more than doubled in late February – to 20 percent from 9.5 percent – after the ruble plunged following the invasion of Ukraine and the central bank took emergency measures to halt the outflow of money from the country. While the rate will be brought down slightly, the central bank said on Friday that “external conditions” for the Russian economy were still “challenging” and constraining activity.
On Friday, the British government said Russia was heading for its “deepest recession since the collapse of the Soviet Union,” estimating that the economy could shrink by as much as 15 percent this year.
But the Russian central bank said more rate cuts could be announced at upcoming meetings depending on the path of inflation and economic growth. The next scheduled policy meeting is on April 29.