Russia's Central Bank on Monday cut its key interest by one point to 11.5 percent as it tried to bolster 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 Central Bank cited the "persistent risks of considerable economy cooling" in a statement explaining the move, forecasting that GDP will fall by 3.2 percent in 2015.
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 dropped from a high in March to 15.6 percent and is expected to be reined in to 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.