BOFIT Viikkokatsaus / BOFIT Weekly Review 2016/24
The board based its decision to reduce the key rate on more benign inflation development and outlook. 12-month consumer price inflation was below forecast, stabilising at 7.3 % in past months and inflation expectations have continued to decline. The board noted that inflation risks have subsided, although remain elevated due to e.g. the stickiness of inflation expectations and uncertainty related to fiscal policy.
The CBR also announced its reduced inflation outlook for this year in conjunction with the meeting. The earlier projection that 12-month inflation would end the year at around 6–7 % was revised down to 5–6 %. The CBR expects the economy to come out of recession at latest in the second half of this year. Economic growth is, however, expected to remain slow next years and therefore not accompanied by higher inflation pressures. The CBR expects to hit its 4 % inflation target by the end of 2017.
The board added that it would consider further rate cuts if inflation risks abate and inflation continues to drop as expected. The next board meeting is set for July 29.
Consumer price inflation and CBR key rate
Source: Macrobond.