Russia slashed interest rates Friday in a surprise move aimed at preventing the economy from tumbling even deeper into recession.
The central bank said it was cutting its key lending rate to 15% from 17%, giving greater priority to preventing a protracted slump than fighting inflation or propping up the ruble.
Russia's economy relies heavily on oil and gas exports. Western sanctions imposed on Russia over the crisis in Ukraine made it even more vulnerable to the collapse in global crude prices late last year.
As the ruble plummeted to record lows against the dollar in December, the Bank of Russia jacked up interest rates to defend the currency and prevent inflation spiraling out of control.
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The emergency move drew howls of protest from Russian borrowers and businesses. Inflation has continued to accelerate in January -- as of this week it was running at 13% -- but the central bank said Friday it expected price pressures to begin to slow due to the fall in economic activity.
"A further substantial decrease of output is expected amid the deterioration of external conditions resulting from the oil price drop and foreign financial markets inaccessibility for Russian borrowers," the bank said in a statement.
The ruble fell on news of the rate cut to trade at nearly 71 to the dollar. That's down about 3% but still some way off the record low of nearly 80 hit in mid December.
Russia's economy will shrink by 3.2% in the first half of this year, the central bank said.
