Russian central bank keeps key rate, says cut possible in Q2-Q3

The Bank of Russia said Friday that it had kept its key lending rate unchanged at 7.75 percent but admitted the possibility of lowering it before the end of the second quarter or in the third quarter this year.

“In its key rate decision-making, the Bank of Russia will take into account inflation and economic dynamics against the forecast, as well as risks posed by external conditions and the reaction of financial markets,” it said in a statement.

The bank expected the year-on-year consumer price growth to decelerate to the targeted 4 percent in the first half of 2020, not in the second half of 2019.

It warned that significant risks are posed by elevated and unanchored inflation expectations, as well as by external factors in particular the still looming risk of a slowdown in global economic growth.

The bank said that it decided to keep its 2019 GDP growth forecast at 1.2-1.7 percent, compared to 2.3 percent in 2018.

It forecasted that increased budget revenues will be used to raise government spending, including investment, so that subsequent years might see higher economic growth rates.