Russia cuts interest rate by 1 per cent to 17 per cent

Russia's central bank has reduced the bank interest by one percentage point to 17 per cent. The gesture was meant to stimulate the wartime economy. There was the apprehension that it was slowing down due to the restrictions of foreign investors through Western sanctions since the beginning of the war in Ukraine in February 2022. The inflation has been running high, and it remained at 8.2 per cent in July-August though it has eased from the much higher levels earlier.

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The quarterly growth rates indicate slowing down, from 1.4 per cent in the first quarter to I.I per cent in the second in the present financial year. There was a conspicuous increase in the deficit, with the figure ballooning to 4.9 trillion rubles from 1.9 trillion rubles last year. The central bank is indeed in a dilemma as to keep the interests high in order to keep the deficit and inflation in manageable terms.

Experts however indicate that Russian economy has weathered the effects of the war in Ukraine and the accompanying Western sanctions. The United States under President Joe Biden and the European Union (EU) had hoped the economic sanctions that the two had imposed would crumble the economy.