MADRID, 10 Jun. (EUROPA PRESS) –
The Bank of Russia has decided to cut the reference interest rate by 150 basis points, which will thus stand at 9.50%, the same as before the beginning of the invasion of Ukraine at the end of last February, after detecting a greater-than-expected slowdown in inflation and a lesser-than-expected deterioration in the economy.
Likewise, the institution indicates that it will evaluate the need for an additional reduction of the reference rates in its next meetings.
The Bank of Russia was forced on February 28 to raise interest rates from 9.50% to 20% to urgently respond to the impact on inflation and the country’s financial stability of the international sanctions imposed by the West after the invasion of Ukraine.
In its analysis, the institution chaired by Elvira Nabiullina acknowledges that the external environment of the Russian economy continues to be challenging and significantly limits economic activity, although it highlights that inflation is slowing down faster and the decrease in economic activity is of lesser magnitude. than expected in April.
In this regard, he points out that recent data suggests that price growth rates in May and early June have been low as a result of movements in the ruble exchange rate and the decline in consumer demand growth in the context of a marked drop in the inflation expectations of households and companies.
According to Bank of Russia forecasts, given the current monetary policy stance, annual inflation will range between 14% and 17% in 2022, drop to a range between 5% and 7% in 2023 to return to the 4% in 2024.
However, the Eurasian central bank warns that the combination of risks created by the external environment can produce both pro-inflationary and disinflationary effects, adding that a worsening of foreign trade conditions and financial restrictions can have a pro-inflationary effect, which would lead to a more pronounced fall in the potential of the Russian economy than expected.
Likewise, it considers that supply-side constraints may be strengthened by a slow replenishment of inventories of finished products, raw materials and components in the event of persistently negative trends in imports, while the materialization of the growing risks of a global recession could, in turn, further weaken foreign demand for Russian exports.
