50-Basis Point Central Bank Rate Cut in Russia

April 24, 2020

The Central Bank of Russia engineered its 7th policy interest rate cut since last June. The total decline over this period amounts to 225 basis points. Five of those earlier reductions had been by 25 basis points, and officials at the March monthly policy review had not cut rates further because of concern over ruble depreciation and its potential upward effect on inflation. But a big change in official caution has occurred over the past month as the full extent of the pandemic and global recession has emerged. A released statement after today’s announced key rate cut to 5.50% from 6.0% warns of “material and prolonged disinflationary influence on price dynamics from the aggregate demand perspective,” which is likely to outweigh upside forces caused by currency depreciation among other things. The changed landscape justifies shifting to an accommodative monetary stance, and further cuts in the 5.5% policy interest rate are likely to become necessary. Real GDP is seen dropping 4-6% in Russia this year, and inflation is projected to stabilize around 4%.

Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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