Russian central bank cuts interest rates by 0.5%

| April 25, 2009 | 0 Comments

Analysts have suggested that the central bank of Russia has cut interest rates by 0.5 percent following pressure from Prime Minister Vladimir Putin, since the reduction came a day after Putin met business leaders who called for a reduction in lending rates.

The key refinancing rate fell to 12.5 percent and the government has given assurances that inflation has been brought under control.

The central bank however has still remained fairly cautious and is increasing the banks reserve requirements by 0.5 percent starting from 1st May.

According toYevgeny Nadorshin, chief economist at Trust Investment Bank, the increase in the banks reserve requirement will reduce the amount of the money that the banks can actually lend and, a result, this contradicts the rate cut.

Previously the central bank was able to fight off pressure from the PM regarding monetary policy

April inflation will be 1.1 to 1.2 percent, according to Economic Development Ministry forecasts and alongside the other announcements, the refinancing rate should give business confidence a boost, as well as some proof that their voice is being heard.

The deputy economy minister announced this week that Russia’s GDP has fallen by 9.5 percent in the first quarter of 2009 compared to last year, so it is clear to see why drastic measures are being called for by the business community.

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