“Major macroeconomic indicators demonstrate further economy cooling. The Bank of Russia estimates GDP decrease in 2015 Q2 compared with the similar quarter last year to be more significant than that in Q1 2015,” the Central Bank of Russia (CBR) said in a statement Friday.
The regulator expects consumer price rises will continue to slow amid slack domestic demand.
“Annual inflation will fall below 7 percent in July 2016 and reach the 4 percent target in 2017. The Bank of Russia will further decide on its key rate depending on the balance of inflation risks and risks of the economy cooling,” CBR added.
In June, the Russian Central Bank cut the key interest rate from 12.5 to 11.5 percent, citing lowering inflation risks as the economy was cooling. The bank then predicted annual inflation by June 2016 would be under 7 percent and would reach the 4 percent target in 2017. It also said that it would continue to cut the interest rate as inflation continued to slow down.
In December the Central Bank hiked the key interest rate to 17 percent in an attempt to curb inflation risks and ruble depreciation. The measure only temporarily calmed the ruble which then lost more than 20 percent, with one dollar buying 80 rubles on the day.
The Russian currency rebounded in the first quarter of this year to an average of 55 against the greenback. This week the ruble fell to a 4-month low, trading at 60 against the dollar and 66.5 against the euro. The currency weakened due to falling oil prices and the stock market crisis in China.