The double-whammy that slammed Russian Federation last year is back: Oil prices are tumbling again and Western sanctions have just been extended.
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The Russian currency exchange rates on Wednesday dropped to the lowest levels since March, reaching 60.22 rubles per U.S. dollar and 66.62 per Euro amid falling oil prices and negative signals of global economy.
In its accompanying statement, the bank played down a recent pick-up in inflation, focusing instead on the economic downturn, which the bank said may lead it to revise down its output forecasts. “The balance of risks shifts towards the considerable economic cooling despite a slight increase in inflation risks,”the bank said in a statement”.
The current trend of central bank easing comes after the bank raised the key interest rate to 17 percent in December 2014 in an attempt to deal with runaway inflation brought about by the weakened ruble. The Russian ruble dropped by 2 percent on Monday, to almost 60 rubles against the dollar, battere…
People walk past an exchange office sign showing the currency…
The ruble’s 19 percent loss against the dollar has been the world’s worst performance since May 13, when the regulator started buying foreign currency to replenish reserves.
The rouble fell sharply even though the central bank also said separately that its suspension of forex purchases would support the rouble in the third and fourth quarters – implying the suspension will continue for months.
The 50 basis point cut means the central bank has now cut its one-week minimum auction repo rate by a cumulative 6 percentage points in 2015. A weaker ruble threatens the government’s plans to curb inflation, which was 15 percent in June.
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The central bank said it estimates the economy contracted at a sharper annual pace in the second quarter compared with the previous three months. “At the same time, the scenario [of] oil prices remaining below $60 per barrel for a long time is more probable than it was in June”.
