Following a monetary policy meeting on Friday, the Russian Central Bank announced it has lowered its benchmark interest rate 50 basis points to 7.5%, as annual inflation unexpectedly slowed down.

In a statement, the bank stated, “Current consumer price growth rates remain low, contributing to a further slowdown in annual inflation… Q2 GDP and high-frequency indicators point to stronger dynamics of business activity than the Bank of Russia expected in July… Monetary conditions continued to ease, and the Bank of Russia views them as overall neutral.”

It also noted that, “the external environment for the Russian economy remains challenging,” however, “a growing number of enterprises are adjusting to the new environment.”

The bank also lowered its annual inflation forecast, predicting annual price growth in 2022 would be roughly 11-13%, and then drop to 5-7% in 2023, before reaching the target rate of 4% in 2024.

Analysts expect to see the central bank drop interest rates twice more in its final two scheduled meetings this year in October and December. Analysts have produced a consensus estimate for the key rate to reach 6.5% by the end of the year.