Russia's Strategic Rate Cut: Reviving Growth and Curbing Inflation

On Friday, the Russian central bank announced a cut in its key interest rate by 200 basis points, bringing it down to 18%. This decision aims to stimulate lending and drive economic growth against the backdrop of slowing inflation rates.

The shift comes as the most significant reduction since May 2022 when economic recovery followed the initial impact of Western sanctions post-military actions in Ukraine. Current deflationary trends and a stronger rouble have bolstered this move.

Despite pressures to lower rates further, the central bank maintains a cautious approach to ensure stability, aiming for a 4% inflation target by 2026. The bank forecasts GDP growth between 1% and 2%, addressing concerns from Russia's business sector over high investment costs.

(With inputs from agencies.)