Bank of Russia Delivers Fifth Rate Cut as Inflation Plunges
Bloomberg
Published Dec 13, 2019 05:30AM ET
Updated Dec 13, 2019 05:51AM ET
(Bloomberg) -- The Bank of Russia delivered a fifth consecutive bout of monetary easing, cutting the key rate by 25 basis points as the inflation rate continued to fall below target.
The bank lowered its benchmark interest rate to 6.25%, according to a statement published on Friday, taking the total reduction this year to 150 basis points. The move was forecast by 26 out of 33 economists in a Bloomberg survey. Four had predicted a hold and three expected a deeper move.
The cuts have so far failed to stoke inflation, which fell well below the bank’s 4% goal last month, while economic growth has also lagged behind the government’s goals. Easing is eroding one of the highest real yields in emerging markets, potentially drawing a line under a rally that spurred $16 billion of inflows into ruble government bonds this year.
Russia is following central banks in Turkey and Ukraine in reducing borrowing costs this week after the Federal Reserve signaled it is in no rush to reverse its three recent rate cuts. Optimism about a trade deal between the U.S. and China is helping to create a rosier backdrop for emerging-market central bankers.
Governor Elvira Nabiullina will hold a news conference at 3 p.m. Moscow time.
Key Insights
- Annual inflation slowed for an eighth straight month to 3.5% in November. The Economy Ministry forecasts a further drop to 2.5%-2.7% as soon as January.
- Spending on a six-year government infrastructure program was meant to get underway this half, but bureaucrats have been cautious about releasing funds.
- Analysts at Goldman Sachs Group Inc (NYSE:GS). warned earlier this month that the central bank is underestimating the potential for price growth to slow dramatically and will come under pressure to revise down its 4% target.
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Written By: Bloomberg
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