"On 10 June 2022, the Bank of Russia Board of Directors decided to cut the key rate by 150 basis points to 9.50% per annum. The external environment for the Russian economy remains challenging and significantly constrains economic activity. At the same time, inflation is slowing faster and the decline in economic activity is of a smaller magnitude than the Bank of Russia expected in April," the statement said.
The regulator will also assess the feasibility of reducing the key rate further at the next meetings - the Bank of Russia lowered its key rate forecast in the coming years. Thus, in 2022, the Bank of Russia forecasts an average key rate within 10.8 - 11.4% instead of the previously forecasted 12.5-14.01%, 7-9% in 2023 instead of 9-11%, and 6-7% in 2024 instead of 6-8%.
At the same time, the bank of Russia noted that changes in the economy and inflation largely depend on fiscal policy decisions. "The Bank of Russia takes into account the decisions already made regarding the mid-term expenditure path of the federal budget and the fiscal system as a whole. In case of a further budget deficit expansion, tighter monetary policy may be required to return inflation to target in 2024 and keep it close to 4% further on," the statement said.
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