The Board of Directors of the Bank of Russia decided to reduce the key rate from May 27, 2022 by 300 bps, to 11% per annum. The latest weekly data indicate a significant slowdown in the current rate of price growth. The dynamics of the ruble exchange rate along with a noticeable decrease in inflation expectations of the population and business contribute to the weakening of inflationary pressure. Annual inflation in April reached 17.8%, however, according to estimates on May 20, it slowed to 17.5%, declining faster than the April forecast of the Bank of Russia, the regulator said.
The inflow of funds for term ruble deposits continues, and credit activity remains low. This limits pro-inflationary risks and makes it necessary to ease monetary conditions.
The external conditions for the Russian economy remain difficult, which significantly limits economic activity. The risks to financial stability have somewhat decreased, allowing some capital controls to be relaxed.
The Bank of Russia will make further decisions on the key rate taking into account the actual and expected dynamics of inflation relative to the target, the process of structural adjustment of the economy, as well as assessing the risks from internal and external conditions and the reaction of financial markets to them, and admits the possibility of lowering the key rate at the next meetings. According to the forecast of the Bank of Russia, taking into account the monetary policy, annual inflation will decrease to 5-7% in 2023 and return to 4% in 2024.
The next meeting of the Board of Directors of the Bank of Russia, at which the issue of the level of the key rate will be considered, is scheduled for June 10, 2022.
