Russia cuts key interest rate by 1.5 percentage points to help economy as ruble stabilizes

MOSCOW – The Russian Central Bank has cut its key interest rate by 1.5 percentage points to 12.5 per cent to stimulate the economy as it heads into recession.

The bank said a reduced threat of runaway inflation, which slowed slightly to 16.5 per cent in April, had made the cut possible, but said there remained a risk of “a significant cooling of the economy.”

Thursday’s rate cut is the third since December, when the Central Bank raised rates to 17 per cent overnight to defend the then-plummeting value of the ruble.

The bank did not update its prediction that the economy will shrink by between 3.5 per cent and 4 per cent this year, although it did say that indicators point to “a significant decline in GDP in the first quarter” of the year.