The Bank of Russia immediately lowered the key rate by 1.5 percentage points to 9.5% per annum, returning it to the level that was observed in February before the introduction of Western sanctions.
"On June 10, the Board of Directors of the Bank of Russia decided to reduce the key rate by 150 basis points to 9.5% per annum. The external conditions for the Russian economy remain difficult and significantly limit economic activity. At the same time, the slowdown in inflation is happening faster, and the decline in economic activity is on a smaller scale than the Bank of Russia expected in April," the report says.
At the same time, operational indicators indicate that the decline in business activity after a sharp drop in April stopped in May. At the same time, there was a heterogeneity of trends in the sectoral context, the regulator points out.
"In the context of the decline in deposit rates, the inflow of funds for term ruble deposits has slowed down. At the same time, the increased risk premium in credit rates and the high demands of banks on borrowers have preserved the rigidity of price and non-price conditions of bank lending. Because of this, activity in the retail and corporate lending market remained weak," the regulator points out. The Central Bank notes that lending was supported by government programs of preferential lending.