Market Updates

Russia Lowers Rate to 14% Citing Worries of Economic Cotraction

Nigel Thomas
13 Mar, 2015
New York City

    Russia

Russia’s central bank lowered its reference rate for the second time in as many months as the bank sees weakening economy a greater risk than the elevated inflation.

Central Bank Governor Elvira Nabiullina told at a news conference, “an attempt to lower inflation” at any cost would be “a short-sighted strategy.”

The central bank made it clear that the contracting economy is a greater concern to policymakers that the inflation rate of 16.7%, highest in 13 years.

Nabiullina lowered reference rate by one percentage point to 14%, after unexpectedly cutting rate by two points in January.

Governor added that the Russia’s economy is expected to contract 3% and continue to shrink between 1% and 1.6% and a strong rebound of more than 6% in 2017.

Russia’s central bank raised rates six times last year, including a sharp rise of 6.5% in mid-December to arrest the falling ruble and cut off capital flight.

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