Bank of Russia surprises with rate cut to 9.75%

Russia's central bank took markets by surprise on Friday, announcing it had cut its key policy rate in response to a quicker than expected drop in price pressures, with further cuts possible.

The one-week repo rate was reduced by 25 basis points from 10.0% to 9.75%.

Inflation expectations were also continuing to decline even as economic activity recovered, Bank of Russia said in a statement posted to its website.

While inflation risks had dropped slightly, they remained elevated BoR also said.

Despite that, BoR "admitted" that further gradual reductions in policy rates were possible over the second and third quarters.

"In these circumstances, given the moderately tight monetary policy, the 4% inflation target will be achieved by the end of 2017 and will be maintained at this level further."