Concerns over inflation in Russia recede, the economy falters and on Friday the central bank acted.
It has cut its key interest rate by one percentage point to 14 percent in a move which was widely predicted. The measure comes as the rouble begins to stabilise following its radical 46 percent decline in 2014.
It is the second time this year the bank has acted. It unexpectedly cut the rate by two points in January. Analysts had predicted a bigger drop in the rate this time.
“The rouble has effectively halved in value. They’re receiving a lot less in dollar income via the sale of oil and other commodities and food prices at home in Russia are biting,” said Darren Sinden, market commentator, Admiral Capital Markets
The rouble strengthened slightly after the decision. By mid-morning is was 61.37 against the dollar down around 0.3 percent on the day having been down 0.5 percent before the rate cut.
In a statement the central bank said, “ as before the balance of risks is positioned towards a significant cooling of the economy.”
The bank played down inflation which is now running at 16.7 percent saying current high inflation was the result of short term factors.