OREANDA-NEWS  The Bank of Russia attributed the first reduction in the key rate in three years, from 21 to 20 percent per annum, to the continued easing of inflationary pressures. Taking into account the fact that domestic demand continues to outpace the possibilities of expanding the supply of goods and services, the country's economy is gradually returning to a balanced growth trajectory, the regulator said in a press release.

The report notes that the Central Bank will maintain such tight monetary conditions as are necessary to return inflation to the 4 percent target in 2026. "Further decisions on the key rate will be made depending on the speed and sustainability of the decline in inflation and inflation expectations," the Central Bank said.

Inflation expectations, which have been changing "in different directions" since April, were also called a factor that could prevent a more sustained decline in price growth in the Russian Federation.

Prior to the decision announced on Friday, June 6, the Board of Directors of the Bank of Russia had not lowered the key rate since September 2022, when it was lowered from 8 to 7.5 percent, doing so for the sixth time in a row.