Unscheduled Policy Review in Russia Leads to Another Three Percentage Point Interest Rate Cut

May 26, 2022

In an unscheduled policy meeting at the Central Bank of Russia, officials implemented their third 300-basis point interest rate cut since April 8 and “holds open the prospect of key rate reduction at its upcoming meetings.” Economic growth in Russia appears to have slumped very sharply this quarter. The ruble plunged very sharply when Russia’s invasion of Ukraine elicited stiff economic and financial sanctions from the West. Rate hikes by Russia’s central bank totaling 1,150 basis points in February plus capital controls lifted the ruble from a low of 143.2 per dollar past the pre-invasion level to 56 per dollar. The timing of today’s further reversal of ruble support was likely prompted by the increasing likelihood of a Russian default on foreign debt for the first time since the early 1920s. Monetary officials also reacted to measures suggesting that expected inflation is starting to settle back.

Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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