The Russian Central Bank has announced an interest rate cut of 100 basis points, cutting its interest rate to 11.5%.
This is in line with market expectations, though it is less than many (including me) would have wanted (see “Russia’s Central Bank Should Now Cut Interest Rates Aggressively”, Russia Insider, 12th June 2015).
In my opinion the Central Bank was too slow to raise interest rates in December, contributing to the ruble crash that month and causing interest rates to go higher than they should have.
It is now over-compensating by bringing interest rates down more slowly than it should.
This is however in line with its generally conservative approach to monetary policy. In contrast to central banks in the West the Russian Central Bank has never been tempted to adopt excessively loose monetary policies or unusual monetary experiments since the 2008 financial crisis.
Given Russia’s history of financial crashes in 1991, 1998 and 2008, and its long-running battle against inflation, the Russian Central Bank doubtless feels that a conservative approach is appropriate and that it cannot take risks.
Though that leaves monetary policy tighter this year than I think it should be, the trend in interest rates — along with inflation — is still down, paving the way for a return to growth in the final quarter.
via Marshall Horn, CFTC Russian Central Bank Slashes Interest Rate
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