Russian central bank cuts rates by 50 basis points

Rate-setters in Moscow surprised some analysts at the end of the week with a larger than expected reduction in short-term official interest rates.

Already during the previous week, CBR Governor, Elvira Nabiullina, had indicated that more needed to be done to avoid a prolonged period of low inflation.

Central Bank of Russia lowered its one-week auction rate, its main monetary policy lever, by 50 basis points to 6.50%, instead of the 50 basis point median cut anticipated by economists.

The monetary authority also reduced its forecast for inflation at year-end 2019 to a range of 3.2-3.7%, saying that disinflationary risks now exceeded pro-inflationary risks.

In a statement, the central bank said that the rate of price increases might dip below 3.0% near the start of 2020, projecting a subsequent pick-up in CPI inflation to 3.5-4.0% by end 2020.

Also on Friday, CBR stuck to its forecast for Russian gross domestic product to expand at a pace of 0.8-1.3%, adding that the acceleration seen in the pace of expansion over the third quarter was due to temporary factors.

CBR also said that it would "consider the necessity" of additional rate cuts at one of its upcoming meetings, with analysts divided on whether that signalled that another big reduction was likely when policymakers next met in December.

"We see scope for further cuts to 6% and maybe even lower, though an immediate followup in December is not guaranteed," said analysts a ING.

As of 1403 BST, spot US dollar was down by 0.48% at 63.7541.