Russia Cuts Rate to 14% as Economy Falters

Russia’s central bank has cut its key interest rate by one percentage point to 14%, as concerns over inflation recede as Russia’s economy falters.

The move, which was widely expected, comes as the rouble stabilises following its radical 46% decline in 2014.

That drop prompted the bank to increase rates up to 17% in an effort to halt the plunge.
The rate rise strengthened the rouble against the dollar.

In January, Russia’s central bank surprisingly cut rates from 17% to 15%.

Interest rates were increased last year to encourage saving rather than spending after the currency’s plummeting value prompted some Russians to snap up foreign goods in case its value fell still further.
Demand for goods during that spree allowed shopkeepers to raise prices, prompting high inflation.

Although inflation still remains high – February’s reading showed that prices were increasing by an annualised rate of 16.7% – economists expect that depressed economic conditions, including rising unemployment, will lead to decreased demand and lower prices.

Russia’s economy has been hit hard by the declining oil price as well as the impact of Western sanctions of its involvement in Ukraine.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza