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Russia cuts interest rates to a post-Soviet Union low


The Central Bank of Russia on Friday cut interest rates by 100 basis points to 4.5%, their lowest level since the fall of the Soviet Union. 

The reduction is sharper than expected by some economists, who had priced in a 50 basis point cut. The CBR had already cut rates by 50 basis points in April.

In a statement, the CBR said that disinflationary factors have been “more profound than expected due to a longer duration of restrictive measures in Russia and across the world.”

The bank said the effect of short-term pro-inflationary factors has been “largely exhausted,” while financial stability risks arising from volatility in global financial markets have also declined.

“Household and business inflation expectations have abated. In these circumstances, there is a risk that in 2021 inflation might significantly deviate downwards from the 4% target,” the CBR said.

“If the situation develops in line with the baseline forecast, the Bank of Russia will consider the necessity of further key rate reduction at its upcoming meetings.”

Russia is currently the third worst-affected country in the world by the coronavirus pandemic, with more than 568,000 confirmed cases.

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