Russia’s Central Bank lowered its benchmark rate for the third consecutive time at an emergency meeting on Thursday as authorities seek to rein in the rouble’s soaring run.
The Bank of Russia will cut interest rates from 14% to 11% from May 27.
Officials raised interest from 9.5% to 20% as an emergency measure after Russia invaded Ukraine in late February and sanctions largely cut off Russia’s financial sector from the global economy.
They then reduced that rate to 17% on April 8 and then to 14% on April 29.
“External conditions for the Russian economy remain difficult, which significantly limits economic activity,” the central bank said. mentioned in a report.
Weak lending activity “limits pro-inflationary risks and necessitates an easing of monetary conditions,” he said.
Annual inflation slowed “significantly”, from 17.8% in April to 17.5% in mid-May, a faster decline than the bank had expected.
The Russian stock market gained 1.7% to 2,380 points after the Central Bank’s announcement.
The Bank of Russia said it “keeps open the prospect of a key interest rate cut at its upcoming meetings.”
The bank said it would make further decisions based on inflation and the economy’s “structural adjustment” to sanctions, scheduling the next rate-setting session for June 10.
Financial authorities have introduced strict capital controls to boost the Russian economy after Russia was hit with unprecedented sanctions linked to Moscow’s military campaign in Ukraine.
Since then, the ruble has rebounded spectacularly and strengthened by around 30% against the dollar. The government has since taken steps to relax capital controls but the ruble continued to appreciate.
A strong ruble is undesirable for the Russian government, which fears it will affect fiscal revenues and exporters.
Following the Central Bank’s key interest rate cut on Thursday, the Russian ruble continued to strengthen to 60.78 against the US dollar and 63.36 against the euro.