Another Central Bank Rate Cut in Russia

October 29, 2009

The backdrop to today’s announced 50-basis point reduction in the Central Bank of Russia’s refinancing rate includes two cuts in September totaling 75 basis points, a cut of 25 bps in August and reductions of 50 basis points each in July, June, May and April.  The 9.5% new rate level, effective tomorrow, compares to 13.0% at the start of 2009 and 11.0% one year ago.  Russian GDP last quarter was 9.4% lower than in 3Q08, and industrial production in September showed an on-year decline of 9.5%.  The new refinancing rate is 1.2 percentage points below on-year CPI inflation, which decelerated to 10.7% in September from 15.1% in the year to September 2008.  Energy revenues are responsible for Russia’s current account surplus, which slightly exceeds 2% of GDP, while the government budget is running in deficit to the tune of almost 4% of GDP.

Copyright Larry Greenberg 2009.  All rights reserved.  No secondary distribution without express permission.


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