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News // Economy

Russia trims interest rate on steady inflation decline

02 May 2017 , 10:12Neftegaz.RU376

The Russian Central bank lowered its key interest rate by half a percentage point to 9.25 % on April 28, 2017, citing the alleviation of inflationary pressure.

 

Inflation is moving toward the target of 4 % for 2017 and the economy is recovering, said the bank in a statement.

The bank cut its interest rate by half a percentage point to 10.5 % in June 2016 in a 1st reduction since August 2015, and further cut the rate to 10 % in September 2016 and to 9.75 % last month.

 

In the statement, the bank said it expects Russia's inflation to decline to 4 % before the end of 2017 and stay around this level in 2018-2019.

Inflation fell to 4.3 % in March from 4.6 % in February, while it was estimated at 4.2-4.3 % as of Monday, the bank said.

The rate began to steadily decline last year from a peak of 12.9 % in 2015.

 

The bank attributed the healthy trend to the appreciation of the ruble on rebounding oil prices and the persistent interest of foreign investors in Russian assets.

The central bank said that Russia's economy continued to recover in the 1st quarter this year, thanks to growth in industrial production and better employment situation.

 

Given the current recovery dynamics and the economy's growing resilience to external factors, the central bank predicted that Russia's GDP will still grow in 2017-2019, even if oil prices decline to $40 per barrel.

 

Last month, the bank expected Russia's GDP to grow by 1-1.5 % this year and by 1-2 % in 2018-2019.

The Russian economy began to contract in 2014 mainly due to weak oil prices and Western sanctions over the Ukraine crisis.

 

Official data showed that Russia's GDP fell by 0.2 % year-on-year in 2016, compared with a 2.8-% decline in 2015.

 

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