Russian central bank cuts key rate to 15% on slower inflation

The Russian central bank cut its key rate by 50 basis points to 15% on Friday as expected, citing slower inflation, but warned that external uncertainty due to the Middle East crisis had increased significantly.

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Russia has benefited from the crisis as prices for oil and other commodities it sells have risen, and the US has lifted some sanctions on Russian oil for the first time since the start of the Ukraine conflict.

“The situation in the Middle East significantly affects the conditions on global commodity markets. The overall impact on the Russian economy will depend on the duration and scale of these geopolitical events,” Elvira Nabiullina, the central bank's governor, told a news conference after the decision.

If not for the increased uncertainty, Nabiullina said that the board could have more actively discussed a potential cut of up to 100 basis points on Friday. She said the impact of the Middle East crisis on Russia was very mixed, however.

An increase in export revenues would help Russia to save more money in its fiscal reserve fund to create a safety cushion, she said, while warning of possible negative consequences due to lower demand for Russian exports in future.

Asked if Russia was a beneficiary of the crisis, she said: “It is premature to draw any conclusions about the combined effects of this situation on the Russian economy.”