Russia's Central Bank lowered its key interest rate from 14.25% to 14% on Friday as it continues down a cautious path of monetary easing despite concerns that Ukrainian attacks on Russian oil refineries and commercial sites will fuel a renewed inflation surge.
The 25-basis-point cut was not guaranteed. While some analysts had predicted what they described as a "cosmetic" lowering, others leaned toward the possibility of the Central Bank leaving its key rate unchanged due to disruptions to domestic oil refining capacity and higher fuel costs, as well as a tightening labor market.
Policymakers said in a press release that annual inflation rose to 5.9% as of July 20. The Central Bank also significantly revised its inflation outlook, warning that it now expects consumer prices to climb to between 6% and 7% later this year.
"Given the direct and second-round effects of the temporary decline in production capacities in certain sectors and more expansionary fiscal policy over a three-year horizon than projected in April, a smoother key rate decrease is required," the press release read.
It said it still aims to bring inflation back to its 4% target in 2027.
