The Central Bank of the Russian Federation has announced the first key interest rate cut since 2022 – from 21 to 20 percent.
The decision was made against the backdrop of signs of a slowdown in the economy related to war spending, reports UNN with reference to the Financial Times.
Details
The rate was announced on Friday, June 6. The Central Bank of the Russian Federation justified its decision by "gradual balancing of the economy after its overheating," – writes the Financial Times.
Domestic demand continues to exceed the economy's ability to expand the supply of goods and services...
Despite some reduction in inflationary risks, they, according to the Central Bank of the Russian Federation, remain predominant. Experts point to the vulnerability of the economy.
The bank is in a very difficult situation
The specialist explains that although prices for non-food products in the Russian Federation are decreasing, the cost of food continues to rise, which hits the poorest segments of the population.
Let us remind you
Since 2023, the Russian economy has been in a phase of overheating due to active government spending on the war. The head of the Central Bank, Elvira Nabiullina, had previously compared the situation to a car that is "rushing at full speed", warning that it "can drive fast, but not for long".
The significantly increased rate of 21% was maintained as a response to inflation, which has increased by about 35% since the beginning of the war against Ukraine. But this led to a decline in credit activity.
Retail lending has virtually stopped, and corporate lending growth has become negligible – but it was a pill that had to be taken
Reference
According to Rosstat, in the first quarter of 2025, the growth rate of Russia's GDP sharply fell to 1.4% compared to 4% in previous years. Taking into account seasonal fluctuations, the real figure was even negative for the first time since 2022.
Russian economy in worse shape than Moscow reports - Reuters14.05.25, 05:36 • [views_79023]