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 could fuel a renewed inflation surge.
The 25-basis-point cut was not guaranteed. While some analysts had predicted the modest 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.
In a press release, policymakers said Friday 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.
