Russian Central Bank contemplating Rate Cut

Russian Central Bank contemplating Rate Cut

Crypto News News
April 23, 2022 by Elias Powell
41
On Thursday, the Governor of the Russian Central Bank, Elvira Nabiullina said that the upcoming meetings of the board would involve discussions about cutting down their key interest rate. This was in light of the economic challenges that the country is facing because of the Western sanctions that have been imposed because of its conflict
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On Thursday, the Governor of the Russian Central Bank, Elvira Nabiullina said that the upcoming meetings of the board would involve discussions about cutting down their key interest rate. This was in light of the economic challenges that the country is facing because of the Western sanctions that have been imposed because of its conflict with Ukraine. The governor further stated that the foreign exchange controls of Russia also require adjustment because they want to avoid scenarios where there is a deviation in the rouble exchange rates from the official levels. Nabiullina is kicking off another five-year stint as the head of monetary policy.

She would have to manage an economic crisis that has brought a great deal of uncertainty, primarily because of the sanctions. In late February, the rate had been increased by the central bank by almost 20% for stabilizing the currency and dealing with inflation. On April 8th, the bank had decided to reduce its interest rate to 17%. The next meeting of the board is scheduled to take place on April 29th. Nabiullina said that they would discuss the possibility of reducing the interest rate further in the next meetings. However, she did not say if a cut could be expected at the meeting next week.

Western sanctions have affected the second-largest lender in Russia, VTB and its head, Andrei Kostinsaid that he expected the central bank would reduce the rate to 15% this month and it would come down by the end of the year to 12 to 13%. Inflation in the country has gone up to 17.6% and it is expected to go as high as 22%. Meanwhile, the Russian economy is expected to fall by almost 9.2% this year. Last year, the country had experienced its strongest growth in the economy, which was around 4.7%.

Nabiullina warned that there would now be structural changes in the Russian economy because trade, as well as access to the global financial system, has become limited due to the sanctions imposed by the West. She said that there would still be problems even if production is localized to a great extent, as import substitution has already taken place for the most part. For instance, she said that while Russia could produce its own paper, it requires foreign bleaching agents. She said it would take time, as the country could face a debt default because of the sanctions that have been imposed on individuals, businesses and banks.

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