Russia’s central bank unexpectedly lowers its interest rates from 20% to 17%


The Central Bank of Russia The reference interest rate dropped to 17% by surprise this Friday, after having drastically increased it to 20% after the first sanctions imposed as a result of the ukrainian invasionto.

The financial institution justifies the cut, which will be effective as of Monday, by the fact that “the risks to financial stability are still present, but have stopped increasing for the time being.”

The rapid action of the Central Bank in February and March “prevented a major and destabilizing bank stampede,” say analysts at Capital Economics in a note.

With the strengthening of ruble -the local currency-, this decision is a success for the Central Bank, since it shows that the capital and currency control measures have worked.

The Bank noted that a “steady inflow of funds” is taking place in bank accounts and that a “marked slowdown in current price growth rates is taking place, in particular due to the dynamics of the ruble exchange rate” .

This Thursday the figures of the inflation for the month of March. Although he broke records since the beginning of the month, he slowed down in the last week of March.

The ruble, which plummeted to unprecedented levels in February and March, has largely recovered to its pre-war level in Ukraine.

The Central Bank also hinted that there could be a further drop in the interest rate at the next meeting, scheduled for April 29.



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