Russia just slashed interest rates to 11.5%

Cossack ax axes tree cutsREUTERS/Eduard KorniyenkoA Terek Cossack takes off axes from a target after a throwing competition at the traditional Cossack games outside the village of Sengileyevskoye, south of Stavropol, September 27, 2014.

The Central Bank of Russia just cut interest rates to 11.5%, a 1 percentage point drop.

According to Mike van Dulken of Accendo Markets, that’s the fourth cut since the central bank dramatically hiked rates to 17% at the end of last year.

Here’s the relevant section from the CBR’s release (emphasis ours):

On 15 June 2015, the Bank of Russia Board of Directors decided to reduce the key rate from 12.50 to 11.50 per cent per annum, taking account of lower inflation risks and persistent risks of considerable economy cooling. Amid significant contraction in consumer demand and ruble appreciation in February-May 2015, consumer price growth continued to slow down. According to the Bank of Russia forecast, given these factors annual inflation will fall to less than 7% in June 2016 to reach the target of 4% in 2017. The Bank of Russia will be ready to continue cutting the key rate as consumer price growth declines further in compliance with the forecast but the potential of monetary policy easing will be limited by inflation risks in the next few months.

Another cut of 1 percentage point was expected, so there’s not a massive market reaction: Immediately after the decision, the dollar dropped, down about 0.75% against the ruble.

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