Bank of Russia Cuts Key Rate, Sending Ruble Down

The Russian ruble dropped today after the central bank made a decision to reduce its key rate as inflation pressure abated. The ruble was strengthening lately following the earlier plunge due to sanctions from the United States and the European Union.

The Bank of Russia announced today:

On 13 March 2015, the Bank of Russia Board of Directors decided to reduce the key rate from 15.00 to 14.00 percent per annum taking into account that the balance of risks is still shifted towards a more significant cooling of the economy.

Regarding its policy in the future, the central bank said:

According to Bank of Russia forecast, the current monetary policy and low economic activity will be conducive to the slowing of annual consumer price growth to 9% over the year (March 2016 on March 2015) and to the target of 4% in 2017. As inflation risks abate, the Bank of Russia will be ready to continue cutting the key rate.

As it usually happens, the announcement of an interest rate cut hurt the currency. The ruble fell even against the euro which itself was extremely weak.

USD/RUB was up from 61.2090 to 62.1038 today. EUR/RUB rose from 65.0490 to 65.2600.

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