Russia cuts rates for the 10th time in one year

Russia cuts rates for the 10th time in one year

The central bank said it is reducing its benchmark refinancing rate to 8.75 per cent effective from Monday, from 9 per cent. The minimum one-day repo rate will be cut to 6 per cent from 6.25 per cent.

“The decision to cut rates is expected to soften the factors restraining economic revival and will secure the stability of the growing trend of gross domestic product,” the regulator said in a statement.

The Russian economy shrank by 10 per cent in the first half of the year in the country’s worst recession in a decade.

There have been incipient signs of recovery, aided by rising oil prices and improving global economic outlook, but the revival has been slow and uneven. Domestic demand — a major contributor to Russia’s robust growth for most of the decade — is not picking up and unemployment still claims 8.1 per cent of its labor force.

And the 10 gradual rate cuts, which brought down the refinancing rate by a total of 425 basis points since April, have failed to achieve its main goal: spurring lending to business.  The bank said in its statement that even the small gains in industrial output in November came unsupported by lending.