Russia cuts interest rates despite market uncertainty

Russia's central bank cut interest rates on Friday -- the seventh consecutive reduction in borrowing costs -- and said it would likely continue to ease monetary conditions in future as inflation risks fade, despite the current market uncertainty.

"The Bank of Russia board of directors decided to cut the key rate by 25 basis points to 7.50 percent," the bank said in a statement.

"Annual inflation remains sustainably low" and "short-term pro-inflationary risks have abated," the central bank explained.

"Therefore the balance of inflationary and economic risks has shifted slightly towards the risks to economic growth," the statement said.

At the same time, the central bank said that uncertainty over the situation in global financial markets had increased.

Nevertheless, with annual inflation "much less likely to exceed four percent this year, in this environment, the Bank of Russia will continue to reduce the key rate and may complete the transition from moderately tight to neutral monetary policy in 2018," it said.

Russia last cut its key rate by half a percentage point to 7.75 percent in mid-December and some analysts had been expecting a reduction of a similar magnitude this time round.

Capital Economics' economist William Jackson suggested "it was only the sell-off in global financial markets over the past week that prevented a larger cut."

Bank of Russia board is scheduled to hold its next policy meeting on March 23.

Central bank chief Elvira Nabiullina said in December that Moscow aims to bring rates down to between six and seven percent within one or two years.