Russian central bank Governor Elvira Nabiullina speaks during a session of the Gaidar Forum 2018 "Russia and the World: values and virtues" in Moscow, Russia January 17, 2018. (REUTERS PHOTO)

MOSCOW, Feb. 9 (Xinhua) -- The Russian central bank on Friday lowered its key interest rate by 25 basis points to 7.5 percent, the first reduction this year amid low inflation.

"The Bank of Russia will continue to reduce the key rate and may complete the transition from moderately tight to neutral monetary policy in 2018," the bank said in a statement.

Annual inflation stood at 2.2 percent in January with food inflation slowing to 0.7 percent, non-food inflation to 2.6 percent, while service prices increased by 3.9 percent, it said.

This is in line with the central bank's estimates that inflation will not exceed four percent in 2018, and will stay close to this level in 2019, the statement said.

Inflation in 2017 was 2.5 percent, down from 5.4 percent in 2016.

The bank said a number of factors may cause inflation to deviate from the targeted figure, both upwards and downwards, including highly volatile food and oil prices.

But in the medium term, in 2019 and 2020, the risk of upward deviation from four percent still prevails over deviation below four percent, it said.

In a separate development, the central bank sent a letter to commercial banks, recommending that they include in their loan contracts a clause on the possibility of interest rates changing, in case the central bank key rate was reduced.

The central bank reduced its key rate six times last year.