Russia cuts interest rate in major push
18.05.12
MOSCOW: Russia's central bank cut its main interest rate for the first time since June 2010 yesterday in a bid to shore up its fragile banking sector against European contagion and continued capital flight.
The bank said the drop of 25 basis points to eight per cent was "based on the assessment of inflationary risks and risks to stable economic growth, including those caused by uncertainty over the foreign economic situation."
The surprise move marks the first time that rates have come down in Russia since June 1, 2010 and underscores mounting concerns over how sovereign debt problems in Europe could impact lending and investment at home.
Russia raised rates for the first time since the 2008 global financial crisis in May 2011 when inflationary pressures began to threaten its cautious recovery.
But officials have since voiced much greater concerns about slowing growth knocking down the price of energy exports on which the Russian economy is based and contributing to investor flight from more risky emerging markets.
Source: Gulf Daily News
