Russia keeps interest rate steady

RUSSIA / FSU POLITICS - In Brief 19 Sep 2020 by Alex Teddy
On September 18 the Central Bank of Russia (CBR) decided not to cut the interest rate. There have been several successive cuts over the past two years. Inflation increased surprisingly on Q3 2020 and the RUB fell. These moves may have promoted the September 18 decision. The Governor of the CBR said additional rate cuts were improbable before the end of Q4 2020 because the recovery is weakening.The interest rate is at 4.25% - an all time low. CBR has already been cut 2% in 2020 with the aim of revivifying the economy. Inflation leapt to 3.6% in August 2020. Russia is also worried about more sanctions. EU countries are threatening them because of the supposed poisoning of Alexei Navalny. The RUB has lost 8% of its value against the USD since June 15 2020. The RUB is at its lowest level since 2016 against the EUR.The Governor of the CBR said that she was not cutting the rate because of international volatility. If Biden is elected this could make Russia's situation worse.The RUB dropped after the CBR's announcement despite it being generally anticipated. The RUB is 75.6 to the USD.CBR is worried about the recovery, which is strong in some sectors but non-existent in others. CBR foresees the economy shrinking 5% in 2020. The service sector is struggling due to underconsumption. The CBR does not want to make saving too unattractive. This may have been a leading factor in the bank's not cutting the rate. Deposits have been dipping due to the lowering interest over the past 2 years. People are turning to the stock market with their spare cash. There has been a great deal of retail investment. Low cost mobile brokerage has fueled this boom.

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