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Europe, Forex

Russian central bank cuts rate to 7.25%, says more cuts on way

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* Russia cuts key rate to 7.25% from 7.50%

* Russia cites lower inflation

* Rouble shows muted reaction to expected rate cut

MOSCOW, July 26 (Reuters) – The Russian central bank cut its key interest rate to 7.25% on Friday, as expected, and said more cuts were likely later this year amid slowing inflation.

It was the second rate cut so far this year and in line with market expectations. All 23 analysts and economists who took part in a Reuters poll unanimously predicted that the central bank would trim the rate to 7.25% from 7.50% at Friday’s meeting.

“If the situation develops in line with the baseline forecast, the Bank of Russia admits the possibility of further key rate reduction at one of the upcoming Board of Directors’ meetings,” the central bank said in a statement.

Friday’s move puts the rate back at a level where it was before a hike in September last year, something the central bank said was possible due to abating inflationary pressure. That, it said, should help it hit its inflation target of 4% in early 2020.

Consumer inflation slowed to 4.6% as of July 22.

Elvira Nabiullina, governor of the central bank, cemented expectations of a rate cut this month when she said in an interview with Reuters that the bank would like to complete the rate-cutting cycle by mid-2020, trimming the key rate in small steps.

The rouble showed a muted reaction to the rate decision, which was considered as interim because it was not followed by a news conference by Nabiullina.

The rouble traded at 63.15 versus the dollar as of 1033 GMT, around levels seen before the rate cut.

The next rate-setting meeting on Sept. 6 will be followed by a news conference at which Nabiullina will explain the central bank’s monetary policy more. (Reporting by Andrey Ostroukh, Maria Kiselyova and Katya Golubkova Writing by Andrey Ostroukh Editing by Andrew Osborn)

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