* Central bank cuts benchmark rate by 25 bps to 7.25 pct
* Says plans to complete easing cycle with more cuts this year
* Says trade protectionism has had little impact on Russia so far
* Rouble shows muted reaction to the priced-in rate move (Adds quotes, detail)
By Andrey Ostroukh and Jack Stubbs
MOSCOW, March 23 (Reuters) - The Russian central bank cut its main interest rate by 25 basis points on Friday and said it expects to complete a cycle of monetary easing this year, although global trade protectionism remains a risk.
Russia needs lower interest rates to prop up a stalling economic recovery through cheaper lending, and lower inflation means it can reduce rates more.
In its second rate cut so far in 2018, the bank lowered its benchmark rate to 7.25 percent from 7.50 percent, matching market expectations.
The central bank began reducing rates soon after an emergency hike to 17 percent in late 2014 aimed at shielding the economy as the value of the rouble plunged and Western economic sanctions over Moscow’s actions in Ukraine took their toll.
Since then, the central bank has managed to rein in inflation, once stuck in double digits, bringing it down to a record low of 2.2 percent in February.
Inflation has slowed to below the central bank’s ultimate target of 4 percent, giving the bank room to cut its main rate until it settles somewhere in the 6-7 percent range it sees as roughly “neutral”.
“We see that a potential for lowering the key rate exists now. We expect to complete the switch to neutral monetary policy this year,” Central Bank Governor Elvira Nabiullina said at a news conference.
Nabiullina said a pause in the rate-cutting cycle should not be ruled out but policy will remain predictable and any changes will be gradual.
The former economy minister also said risks of trade protectionism have increased globally, but she added that the direct impact on the Russian economy had been limited so far.
Asked if the central bank could resume buying foreign currency, something it last did in 2015, Nabiullina said Russia’s international reserves could approach $500 billion without currency interventions by the central bank.
Analysts at Renaissance Capital said the central bank was now in a “dovish phase” of the easing cycle and its rhetoric might change if inflation picks up faster than previously thought.
Analysts at Capital Economics analysts noted that the bank’s estimated neutral rate of 6-7 percent meant it could cut by anything from 25 to 125 basis points more.
“But, when questioned about what was likely, Ms. Nabiullina sounded deliberately vague,” they added in a note to investors.
Steady and low inflation reduces uncertainty for businesses and is important for households too, Nabiullina said, adding that all this together should contribute to stronger economic growth in Russia.
The central bank reiterated its gross domestic product growth forecast for 2018 of 1.5-2.0 percent, saying it expects inflation to bounce off historic lows in the second quarter and rise towards its target of 4 percent later this year.
“The Bank of Russia’s general perceptions of the Russian economy’s growth have remained unchanged,” the central bank said in a statement.
Friday’s rate cut was widely priced in as the central bank’s head of monetary policy had said earlier this month that he would recommend lowering the rate further.
The rouble showed muted reaction to the rate move, firming slightly to 57.12 versus the dollar as of 1437 GMT compared with 57.21 shortly before the central bank’s announcement.
The bank’s board next meets on April 27. (Reporting by Andrey Ostroukh and Jack Stubbs Editing by Hugh Lawson)