(MENAFN- AFP) Russia's central bank on Monday cut its key interest by one percentage point to 11.5 percent as it tried to ease the pain for an economy battered by Western sanctions and lower oil prices.
The rate cut is the fourth this year after authorities hiked interest rates dramatically in December to 17 percent as the ruble nosedived.
The Bank of Russia cited the "persistent risks of considerable economic cooling" in a statement explaining the move, forecasting that gross domestic product would fall by 3.2 percent this year.
Following the rate cut Russia's official statistics agency said that the economy had shrunk by 2.2 percent in the first quarter of 2015 compared with the same period last year.
The figures were worse than expected after a preliminary estimate in mid-May put the contraction at 1.9 percent.
The authorities insist inflationary fears have subsided as they have chipped away at the interest rate over the past months in a bid to breathe life into the country's shrinking economy.
Inflation in June slowed from a high in March to 15.6 percent and is expected to go below 7.0 percent by June 2016, the statement from the bank said.
In the short term, however, the bank warned it may have limited room for manoeuvre.
"The Bank of Russia will be ready to continue cutting the key rate as consumer price growth declines further in compliance with the forecast, but the potential of monetary policy easing will be limited by inflation risks in the next few months," the statement said.
Russia's economy has slipped into recession as the double whammy of Western sanctions over Moscow's meddling in Ukraine and low oil prices have taken their toll.
Russia's ruble -- which lost some 40 percent of its value against the dollar in 2014 -- strengthened earlier this year before dipping again in recent weeks.
The recovery of the ruble towards the start of the year led Russian officials to claim that the worst of the crisis was already behind them.
But the long-term effect of the economic turmoil was underlined by official figures released last week that showed the number of Russians living in poverty had risen by some 3.1 million over the last year to 22.9 million.
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