Russian President Vladimir Putin said on Wednesday that circumstances now favour a cut to the central bank’s key interest rate at its forthcoming policy meeting. Speaking in televised remarks, he pointed to recent policy measures and a decline in inflation as the basis for expecting a rate reduction.
The central bank previously trimmed its main rate to 14.5% from 15% on April 24. Putin acknowledged that many business leaders and bankers continue to regard the current rate level as too high.
The bank’s next rate-setting session is scheduled for June 19. In his televised comments, the president said: "The (economic) situation is under control; that’s absolutely obvious. And the measures taken have produced the desired results."
He added: "Inflation is falling - just over 5%. Therefore, I think we have every right to expect both a reduction in the key rate and the achievement of other necessary parameters."
Putin’s remarks reiterate the administration’s view that policy actions to date are working to bring inflation down and create scope for monetary easing. The central bank’s April 24 decision to lower the key rate to 14.5% from 15% is the most recent adjustment ahead of the June meeting.
Observers within the business community and banking sector have repeatedly signalled that the prevailing rate is seen as burdensome. The president’s comments make clear the Kremlin’s expectation that the central bank will consider further easing at its June 19 meeting, though the formal decision remains with the bank.
What this means
- Monetary policy is at the center of attention as the central bank prepares to meet on June 19.
- Inflation, cited at just over 5%, is highlighted by the president as a factor supporting rate relief.
- Business leaders and bankers continue to express concerns that the current rate is higher than desirable.