BOFIT Viikkokatsaus / BOFIT Weekly 2019/51

Last Friday (Dec. 13), the Central Bank of Russia board of directors decided to cut the CBR key rate by 25 basis points to 6.25 %. The CBR said the cut was appropriate, largely due to a sharper-than-expected slowdown in inflation. The rate cut was the fifth this year. The CBR mentioned that the key rate could be lowered further in the first half of 2020.

The on-year rise in consumer prices slowed in November to just 3.5 %. The slowdown in inflation reflects factors such as the ruble’s appreciation since the start of this year, weak economic growth and a good harvest. The central bank’s updated inflation forecast now sees on-year inflation in the range of 2.9−3.2 % at the end of this year (down from 3.2−3.7 % earlier). The CBR expects the inflation to rise to a range of 3.5−4.0 % by the end of 2020 and thereafter remain near the official 4 % inflation target.

The average market rate on ruble-denominated corporate loans over one year was 9.3 % in October. The average rate on household ruble loans over one year was 12.7 % in October.