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Russia’s central bank likely to cut rates, suggest economists

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Russia’s central bank likely to cut rates, suggest economists

russian central bank
russian central bank
Photo: Reuters/Maxim Shemetov

The Central Bank of Russia (CBR) will meet today to review the country’s monetary policy, and interest rates are widely expected to be lowered from 7.75% to 7.5%.

The cuts come amidst a decrease in consumer spending over the last year, with April posting a dip in private spending by 4.9% from the previous year, as well as a drop in real wages. Though yearly inflation currently hovers around 5% due to an increase in the country’s value-added tax from 18% to 20%, the CBR expects inflation to settle closer to its goal of 4% in the coming year.

Given an expected increase in public sector salaries, a rosier inflationary outlook– which should bolster real wages–and improving consumer confidence, today’s interest rate cuts will likely help promote domestic spending and boost economic growth in the second half of 2019. Assuming no major drops in oil prices rattle the ruble and dramatically spike inflation, the CBR could be expected to cut interest rates again before the end of the year.

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