Russian Central Bank cuts interest rates by 50 basis points to 7.50%, and cites a decline in inflation

The Bank of Russia (BoR) cut basic interest rates by 50 basis points, to 7.50% per year, in a decision released this Friday (16).

Despite the prevalence of global inflationary forces, the entity cites, in a statement, the deceleration of prices to consumers in the country, amid the cooling of domestic demand.

The institution predicts that the annual rate of Russian inflation will end this year between 11% and 13%, after decelerating from 15.1% in July to 14.3% in August.

With the effects of monetary policy, the expectation is for a drop to the level of 5% to 7% in 2023 and back to the target of 4% in 2024.

The Bank attributes the inflationary cooling to adjustments in the prices of goods and services, after the surge in March, in addition to the volatilities of the Russian ruble. According to the BoR, the move could be driven by people’s greater propensity to save, improvement in supply problems and a positive harvest in agriculture this year.

On the other hand, the Russian Central Bank assesses that inflationary pressures would be fueled by a lack of control in inflation expectations, a recovery in demand and the tightening of trade restrictions imposed by Western sanctions related to the war in Ukraine.

“The external environment for the Russian economy remains challenging and significantly restricts economic activity,” he says.

On fiscal policy, the Bank of Russia warned that if there is a budget expansion, it will be forced to adopt a more restrictive monetary policy to contain inflation.

Source: CNN Brasil

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