Russia cuts interest rate again as ruble rebounds but warns economy will crash amid sanctions and soaring inflation
Russia's central bank is cutting interest rates for the second time in a month, this time to 14% from 17%.
- The bank cited a stabilizing ruble, which has rebounded from its losses since the war in
The Central Bank of Russia cut interest rates on Friday for the second time in April as the ruble continues to recover, but warned the economy will crash this year.
The lastest cut brought rates to 14% from 17%, following an April 8 reduction from 20%. After Russia launched its war on Ukraine in February, the CBR raised raised interest rates to 20% from 9.5% in an emergency effort to aid the plunging ruble.
On Friday, the CBR noted that the ruble has rebounded strongly to pre-war levels. Russia has propped up the currency through stringent capital controls that have made the ruble one of the top performing currencies ac cross the globe.
The ruble was down 2% on Friday, but at 72 rubles equaling one US dollar the exchange rate still tops the rate of 80 to the dollar just before the invasion of Ukraine. At its low in early March, the ruble had traded at 120 to the dollar.
As the currency regains its footing, the Kremlin is hoping to shift its attention back toward the economy to absorb the blow of Western sanctions.
The CBR estimated the Russian economy will shrink by 8% to 10% this year and noted it's preparing for potentially worsening restrictions from global powers as the war in Ukraine rages on.
"The decline in the potential of Russia's economy driven by restrictions may turn out to be more pronounced than the baseline scenario assumes," the CBR said in a statement.
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