The Central Bank of Russia lowers its master rate to 20 % to curb inflation and support growth
The Central Bank of Russia (BCR) reduced its 20 %key rate on Friday, June 6, slightly decreased compared to its previous rate of 21 %, which had been its highest level for two decades, and ensured to regain control of inflation, galloping for months. “Current inflationary pressures (…) continue to decline “said the BCR in a press release. “We are close to the scenario of balanced growth” And “Without overheating”said the president of the BCR, Elvira Nabioullina, at a press conference.
This is the first drop in the BCR key rate since September 2022. At the same time, growth over one year has slowed 1.4 % in the first quarter, according to official statistics, its lowest level in two years.
Prices have been increasing rapidly throughout the Russian economy for months, fueled by massive military spending-unprecedented since the Soviet period-to conduct the conflict in Ukraine, and by serious shortages of labor.
Exorbitant interest rates have also hit companies hardly affected, some of the greatest business leaders in the country pressure on the central bank so that it softens its monetary policy.
According to the BCR, on June 2, inflation slowed down at 9.8 % over a year, but it is still far from the 4 % target set by the authorities. “Monetary policy will remain strict for a long period”warned the BCR on Friday.
Despite the strong Western sanctions targeting it, Russia posted strong economic growth in 2024, mainly thanks to the massive state expenditure on defense, which should further increase by almost 30 % in 2025. Economists have however warned that this growth fired by the defense industry did not reflect a real increase in productivity.
Source: Lemonde