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Russia Eases Monetary Conditions As Slowing Global Economy Bites

Elvira Nabiullina, a Russian economist and Governor of the Bank of Russia
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The Bank of Russia cut short term interest rates from 7.75 to 7.5% in a bid to counter the slowing global economy. The head of the central bank, Elvira Nabiullina declared the bank was now in an easing posture.

“One or even two more rate cuts are possible this year if the situation develops according to our base-case scenario and there are no negative surprises,” central bank Governor Elvira Nabiullina said, reported Bloomberg.

Annual inflation decelerated for a third month in June, reaching 5% as of June 10, the central bank said. Price growth will slow to 4.2%-4.7% by the end of the year, according to a statement published Friday, which cited weak consumer demand and ruble strength.

The central bank also cut its growth forecast for 2019 to 1.0%-1.5% from 1.2%-1.7%. A worsening of international trade tensions may lead to a slowdown in global growth, the statement warned, added Bloomberg.

“If the situation develops in line with the baseline forecast, the Bank of Russia admits the possibility of further key rate reduction at one of the upcoming Board of Directors’ meetings and a transition to neutral monetary policy until  mid-2020,” the statement said, reported The Moscow Times.

Russia’s central bank governor, Elvira Nabiullina, suggested on Friday that spending of the National Wealth Fund should be reconsidered to see whether the cushion is big enough to protect the country from the possible shocks, reported Reuters.

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