Russia’s central bankers are expected to cut interest rates today, probably by 25-basis points to 8.25%. Despite the doom and
Russia’s central bankers are expected to cut interest rates today, probably by 25-basis points to 8.25%.
Despite the doom and gloom of recent years, Russia’s economy is beginning to gain momentum. Last month, the economy grew 2.4% and is expected to post annualised growth of 1.7% this year—the fastest since 2012.
A pick-up in commodity markets is partly responsible. The price of oil has stabilised at around $50 a barrel this year after dipping below $30 in early 2016. Strengthening domestic demand and private consumption is also helping boost economic activity.
Today’s expected rate cut will further ease the cost of borrowing, spurring investment. The central bank has been afforded room to manoeuvre; last month inflation—a key monetary policy consideration—hit a record post-Soviet low of 3%.
All this comes at an opportune time for Vladimir Putin. Although yet to formally announce his candidacy for elections next March, Mr Putin is likely to capitalise on the substantial improvement in Russia’s economy.
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