Russian central bank cuts key rate to 8.5 pct

Moscow (Sept 15)  The Russian central bank cut its key rate to 8.5 percent from 9 percent on Friday and said that falling inflation may prompt it to make further rate cuts this year.

Friday's cut was in line with market expectations. Twenty of 23 analysts and economists polled by Reuters beforehand had predicted the central bank would lower its key rate by 50 basis points . The central bank cited a quicker-than-expected slowdown in consumer inflation as the main reason for the rate cut, the fourth so far this year.

"During the next two quarters, the Bank of Russia deems it possible to cut the key rate further," the central bank said in a statement.

The bank said a rapid slowdown in inflation, which has fallen from around 17 percent in early 2015, paves the way for more rate cuts, repeating wording it used to describe the scope for monetary easing after its previous board meeting in July.

The central bank also revised its economic forecasts. Citing stronger consumer demand, the central bank said it now expects gross domestic product to grow by up to 2.2 percent in 2017, up from 1.3-1.8 percent forecast previously.

The rouble briefly eased slightly to 57.56 versus the dollar compared with a level of 57.54 shortly before the rate decision.

The central bank's next rate meeting is scheduled for Oct. 27.

Reuters