CBR slashes key rate

RUSSIA / FSU POLITICS - In Brief 14 Jun 2019 by Alex Teddy
On June 14 the Central Bank of Russia reduced the key rate to 7.5%. This was prompted by inflation forecasts and growth slowing more sharply than anticipated. Inflation was predicted to be 5.2% maximum. Now the maximum prediction is 4.7%. VAT is being increased which has helped to reduce inflation.This cut will make lending cheaper and therefore stimulate the economy. The major banks have already been striving to keep rates low. The goal is to reduce the consumer credit bubble. Manufacturing and consumer spending are slowing which is worrisome.There is a hope that national projects will benefit the economy and salaries will increase. Optimism is probably misplaced on these issues. However, the budget is looking better. State revenues have risen more than expected. The deficit is not as high as foreseen.Global demand for oil might slow. On the other than attacks on tankers in the Gulf have raised the price of oil. But this rise might be temporary.

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