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Russia cuts interest rates and senses economic crisis is over


Russia cuts interest rates and senses economic crisis is over


The Russian central bank has cut interest rates to 12.5% and is now saying the currency is “too strong”.

The 1.5% cut is the third this year and comes on the heels of a relative stabilisation in the value of the rouble which has recovered from 68 to the dollar in February to 51 today. The bank added inflation expectations remained high but that it would be ready to make further rate cuts if inflation slows from its current 16.5 percent as expected.

The cut also shows the government believes the worst of the exchange rate crisis is over and that the end is in sight for the wider economic crisis, but that view is not shared by all observers. Some say sanctions will bite deeper this year and a continued low oil price will force Russia into making some hard choices before the end of 2015.

Still, the dark days of 80 roubles to the dollar during the December panic appear far behind for the moment at least. One major risk remains, one which would throw all calculations off; a resumption of heavy fighting in Ukraine.

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