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Wednesday, December 7, 2022
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Russia’s key rate cut to 14 percent

The Bank of Russia has decided to cut its benchmark interest rate by 3 percentage points, to 14% per annum, and sees room for another rate cut in 2022.

The revised medium-term forecast of the Bank of Russia assumes annual inflation in 2022 at the level of 18-23%, with a subsequent decline to 5-7% in 2023 and 4% in 2024.

In the baseline scenario, the Bank of Russia expects annual inflation to continue to rise in the coming months due to the base effect. The ongoing monetary policy will take into account the need for restructuring of the economy and ensure that inflation returns to the target in the medium term, the Central Bank notes.

According to Elvira Nabiullina, head of the Bank of Russia, the risks to price and financial stability in Russia have stopped growing. Important factors for further inflation dynamics will be the efficiency of import substitution processes, as well as the scale and speed of recovery in imports of finished goods, raw materials and components, the regulator emphasizes.

Currently, Q4 2022 is supposed to be the bottom point of the Russian economy decline. The revised forecast for Russia’s GDP dynamics sees a contraction from 8% to 10% in 2022, furtherly 0% to minus 3% in 2023, then an increase 2.5% to 3.5% in 2024.

In addition to this, according to the Central Bank, the mandatory sale of foreign exchange earnings can now be canceled for non-commodity exporters, and reduced to 50% for those exporting raw materials.

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