By Andrey Ostroukh and Megan Davies
MOSCOW (Reuters) - The Russian central bank is ready to act "more decisively" when cutting interest rates, Governor Elvira Nabiullina said, increasing the chances the bank's key rate will be lowered by more than 25 basis points as soon as the end of October.
The Bank of Russia has been cutting rates this year as economic growth slowed and inflation waned. A faster-than-expected decline in consumer-price growth would open the door for further reductions.
The central bank was trimming rates a quarter of a percentage point at a time. Now it can move faster and further, Nabiullina said in a televised interview with CNBC released on Friday.
"We see that our key rate not only can be reduced, but we can act more decisively," Nabiullina said.
"Usually, you know, the central bank of Russia prefers to adjust the key rate at a moderate pace. However, when we see that ... the data can change our forecasts significantly, we can adjust our monetary policy more decisively."
Annual consumer inflation in Russia, the central bank's main responsibility, has already slipped below its 4% target. The central bank had expected that would happen last this year or early next year.
One week before the central bank's rate-setting meeting on Oct. 25, Nabiullina has sent other signals suggesting the bank might cut its key rate from the current 7%.
"Pro-inflationary risks have not materialized," Nabiullina told reporters on the sidelines of annual meetings of the International Monetary Fund the World Bank in Washington D.C.
Speaking just before the week of silence that the central bank observes, Nabiullina opened the door for a rate cut of more than 25 basis points to the key rate, analysts said.
"This is a very strong signal that a 50-basis-point rate cut option might be discussed alongside the well-expected 25-basis- point cut (a consensus now) and even an `on hold' decision," said Dmitry Polevoy, chief economist at the Russian Direct Investment Fund.
"We believe the regulator may go big and cut the key rate by 50 basis points on Oct. 25," Nordea Bank's chief economist, Tatiana Evdokimova, said after Nabiullina's comments.
Others agreed, saying that such expectations should support a rally in Russian OFZ treasury bonds and also support the rouble.
Expectations that the central bank will cut rates as soon as next week are set to lift bond prices, which move inversely with their yields.
Yields on 10-year OFZ bonds (RU10YT=RR) dropped to 6.54% on Friday, their lowest since May 2013. Yields wee 7% in early October.