Russia cuts interest rate to 17% as wartime economy slows while deficit grows
Summary
Russia's central bank reduced its interest rate from 18% to 17% to help the economy as growth slows and the war against Ukraine increases the budget deficit. Inflation remains high at 8.2%, and the central bank is concerned that inflation expectations are not improving. The deficit has grown, and oil revenues have decreased, yet unemployment is low, and household incomes are rising.Key Facts
- Russia reduced its key interest rate to 17% from 18%.
- The interest rate had been raised to 21% previously to address inflation.
- Russia's inflation rate is 8.2%, with concerns it may not decrease further.
- The country's economic growth slowed to 1.1% in the second quarter of the year.
- The budget deficit increased to 4.9 trillion rubles between January and July.
- Oil and gas revenues dropped by 19% from the previous year.
- Despite challenges, the unemployment rate in Russia is at record lows.
- Russian government finances its deficit by selling ruble bonds to local banks.
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