Russia’s central bank lowered its reference rate for the second time in as many months as the bank sees weakening economy a greater risk than the elevated inflation.
Central Bank Governor Elvira Nabiullina told at a news conference, “an attempt to lower inflation” at any cost would be “a short-sighted strategy.”
The central bank made it clear that the contracting economy is a greater concern to policymakers that the inflation rate of 16.7%, highest in 13 years.
Nabiullina lowered reference rate by one percentage point to 14%, after unexpectedly cutting rate by two points in January.
Governor added that the Russia’s economy is expected to contract 3% and continue to shrink between 1% and 1.6% and a strong rebound of more than 6% in 2017.
Russia’s central bank raised rates six times last year, including a sharp rise of 6.5% in mid-December to arrest the falling ruble and cut off capital flight.