Russia’s Monetary Policy and Growth

Russia's monetary policies.Russia’s central bank monetary policy and the lack of good borrowers will have a negative effect on growth, and lending will resume being costly, despite the liquidity surplus in the banking sector.

Even if the Russian central bank cuts its rate today to 10%, a reduction of 50 basis points, the economy will not be supported by any form of easing, thus heading toward its second consecutive year of recession and low oil prices.

Careless lending could affect Russia

The risk of careless lending, inflation, and asset bubbles captures the focus of the Russian government and the nation’s analysts.

Part of the central bank’s attempts, for soaking up the liquidity, is the preparation of first bond auctions so at to be able to somehow reach the inflation target of 4% by next year, 2017.

The Russian central bank highlighted that a cut in interest rates will not support growth but will instead cause a spike in inflation.

The nation’s gross domestic product (GDP) for this year is expected to decline 0.5%, before returning to the rate of 0.8% in 2017.

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