Russia's central bank today cut its key interest rate by 1.5 percentage points to 12.5%, citing declining inflation risks and the need to kick-start the ailing economy. 

The rate was lowered from 14%, "taking account of lower inflation risks and persistent risks of considerable economy cooling," the bank said in a statement. 

The cut is the third this year following an emergency hike by a massive 6.5 percentage points in December to stop a sharp depreciation of the Russian currency. 

Since then the rouble has recovered and the bank said it "will be ready to continue cutting the key rate" as it expects inflation to continue to abate. 

Russia's economy however slumped into recession, with the government reporting a 2.2% contraction in the first three months. 

The central bank said current inflation stands at 16.5% but attributed it to "short-term factors" which include last year's rouble crash. 

It said that "annual inflation will slow down to less than 8% in a year and to the target of 4% in 2017." 

Analysts said that today's cut was bigger than expected and likely means that the rate will fall to 9% by the end of 2016. 

Russia's economy has been hit by a myriad of shocks, including economic sanctions imposed by Western countries over Ukraine, to which Moscow has responded with an agricultural embargo that sent food prices soaring. 

At the same, the halving of crude prices, Russia's main export commodity, has sent the economy into a nosedive, though the Kremlin has denied there is a crisis.