Russia cuts interest rates to record low of 9%

Bank Rossii, Russia’s central bank, has cut interest rates by 50 basis points to 9% - a record low and the ninth time rates have been cut since April in bid to boost demand.

Russia’s economy, which is heavily reliant on oil exports, has suffered from a severe downturn but the economy appears to now be on the road to recovery as a result of the rebound in oil prices.

Earlier this month, statistics body Rosstat revealed that Russia’s economy expanded by 13.9% in the third quarter compared with the second quarter.

However, when compared with the same period a year ago, the Russian economy contracted by 8.9%.

Russia’s Economics Ministry is predicting the economy will contract 8.5% in 2009, but will see growth of 3% in 2011 and 4.3% in 2012.

The forecast was similar to that from the Organisation for Economic Co-operation and Development, who recently said Russia’s economy for the year would contract by 8.7%, before starting to recover next year.

Meanwhile, in a statement today, the central bank said: “The lending activity of Russian banks is still at a low level, and domestic demand remains insufficient to assure stable growth in output, which determined the necessity of lowering the level of interest rates.”

Furthermore, the bank added that the new lower rate would “contribute to restraining the appreciation of the rouble”.

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