ADDS DETAILS
By Aysu Bicer
ANKARA (AA) - Russia's central bank cut its key interest rate by 150 basis points to 8% in July, well above market forecasts for a smaller reduction of 50 basis points.
Following the decision, the ruble lost value against the greenback by as much as 2.6%.
"The external environment for the Russian economy remains challenging and significantly constrains economic activity," the Bank of Russia said in a statement.
Yet, it said the decline in business activity is slower than the bank expected in June.
"Current consumer price growth rates remain low, contributing to a further slowdown in annual inflation," it underlined.
In June, Russia's annual inflation diminished to 15.9% after 17.1% in May.
According to the central bank's forecast, annual inflation will go down to 12-15% in 2022, to 5-7% in 2023, and return to 4% in 2024.
Monetary conditions continued to ease, but generally remained tight as inflation expectations declined, it said.
Pointing out that movements in the economy and inflation largely depend on fiscal policy decisions, the bank said that it had taken into account measures that were already in force related to the mid-term expenditure path of the federal budget and the fiscal system as a whole.
It said that in case of "further budget deficit expansion," tighter monetary policy may be required to return inflation to the 2024 target and keep it close to 4%.
The Bank brought interest rates below pre-war level last month.