The Russian Central Bank pulled back the key rate again, down 1% to 14%.
The analysts were looking for a lowering in the interest rate in the ailing Russian state; Friday saw the central bank fold to another 1% drop after it hiked the rate up in December 2014 to 17%, dropped it to 15% by January and is now letting it fall further in order to sustain the ruble against other currencies.
The ruble made movements on the announcement but came out of the initial fluctuation ahead of the greenback and euro.
Russian Central Bank announced the lower rate saying that the change took, “into account that the balance of risks is still shifted towards a more significant cooling of the economy. This decision will contribute to the reduction of these risks without posing an additional threat of increased inflationary pressure.”
Under the weight of sanctions and low oil prices on the economy, Russia has made recent inroads into upholding the ceasefire in Ukraine, which may decrease fears of additional sanctions being imposed by Europe over Russia’s support of the Ukraine take-over.
However, Putin’s country is in deep recession and the Bank of Russia is looking for ways out through monetary easing policies. In January 2015 there was a continued fall in real wage growth and a sharp decline in consumer expenditures which exerted a restraining influence on the prices of goods and services. The bank said, “only net exports will make a positive contribution to output growth. According to Bank of Russia estimates, GDP will fall by 3.5-4.0% in 2015,” adding, “annual inflation will fall to about 9% over the year and to the target of 4% in 2017.”
The forecast from the bank is as follows; “the current monetary policy and low economic activity will be conducive to the slowing of annual consumer price growth to 9% over the year (March 2016 on March 2015) and to the target of 4% in 2017. As inflation risks abate, the Bank of Russia will be ready to continue cutting the key rate.”
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