Topline
The Russian Central Bank on Friday revised interest rates down to 9.5%—the same as it was in February prior to Russia’s ongoing invasion of Ukraine—a sign that inflation in Russia may have peaked after reaching a two-decade high after the country was hit with a bevy of Western sanctions.
A view of the Russian Central Bank headquarters in downtown Moscow.
Key Facts
The central bank slashed interest rates by 150 basis points on Friday, down from 11%—in the latest round of cuts since the key rate was hiked to 20% on February 28.
In a press statement, the Russian central bank acknowledged the external environment for the country’s economy remained “challenging and significantly constrains economic activity.”
Despite this, the regulator said inflation was slowing faster and the country’s economic decline was lesser than previously anticipated in April.
The central bank noted annual inflation as of June 3 stood at 17%—down from a two-decade high of 17.8% in April.
Inflation is expected to hover between 14 and 17% by the end of 2022 and then drop down to 5-7% in 2023 before returning to 4% a year later, the regulator added.
Big Number
57.03. That is the exchange rate for the ruble against the dollar as of Friday morning. The Russian currency hit an all-time low of 150 against the dollar in early March but has since managed to rally, aided by the Kremlin’s decision to severely curb transfers of money abroad and other measures.
Key Background
While economists remain skeptical about the resilience of the ruble, global companies that were forced to exit Russia due to sanctions have incurred massive losses. According to a Wall Street Journal report, the nearly 1,000 western businesses that have left Russia collectively face more than $59 billion in losses. Among the steepest hits have been oil companies like BP and ExxonMobil who have recorded losses of $25.5 billion and $3.4 billion so far respectively. Aircraft lessors have also been hit by the exits as Russia has refused to return passenger jets that were leased out to the country’s airlines by the likes of Ireland’s AerCap Holdings—which has written off around $2.7 billion.
Further Reading
Russia cuts key interest rate back to prewar level (CNBC)
Business Losses From Russia Top $59 Billion as Sanctions Hit (Wall Street Journal)
Source: https://www.forbes.com/sites/siladityaray/2022/06/10/russian-central-bank-slashes-interest-rate-to-pre-invasion-levels-as-inflation-appears-to-peak/