Central Bank of Russia lowers policy rate by 100 bps to 4.5%

Russia's central bank announced on Friday that it lowered its policy rate by 100 basis points to 4.5% and said that it will consider the necessity of further rate reductions at its upcoming meeting.

With the initial market reaction, the USD/RUB pair recovered modestly from daily lows and was last seen losing 0.58+ on the day at 69.4670.

Key takeaways from the policy statement

"The Bank of Russia will take into account actual and expected inflation dynamics relative to the target and economic developments over the forecast horizon."

"Disinflationary factors have been more profound than expected due to a longer duration of restrictive measures in Russia and across the world."

"The effect of short-term pro-inflationary factors has been largely exhausted."

"Financial stability risks related to the situation in global financial markets have declined."

"Household and business inflation expectations have abated. In these circumstances, there is a risk that in 2021 inflation might significantly deviate downwards from the 4% target."

"The key rate decision taken by the Bank of Russia is aimed at limiting this risk and maintaining inflation close to 4%."

"The influence of the weaker ruble and the episodes of increased demand for certain product groups in the march has been exhausted."

"Current monthly annualised inflation will continue to decline."

"In the context of prevailing disinflationary factors, there is a risk that in 2021 inflation might significantly deviate downwards from the 4% target."