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World News | Russia’s Central Bank Slashes Rate, Saying Inflation Slows

MOSCOW, July 22 (AP) The Russian central bank cut its key interest rate on Friday, just a month after lowering it to where it was before sending troops to Ukraine, saying inflation was still easing in part as consumer demand weakened.

The bank cut its key rate by 1.5 percentage points to 8 percent. It said inflation expectations had “declined significantly,” to spring 2021 levels, while the decline in business activity was slower than expected in June.

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However, “the external environment for the Russian economy remains challenging and continues to significantly constrain economic activity,” the central bank said in a statement.

It rose as high as 20 percent in the wake of the Feb. 24 military operation in Ukraine and the resulting Western sanctions that restrict transactions with Russian banks, individuals and companies.

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As sanctions from Russia and the exit of Western companies led to global economic isolation, the central bank managed to stabilize the currency and financial system by blocking money from Russia and forcing exporters to exchange most of their foreign earnings into rubles.

The ruble traded at $58.8 on Friday, higher than the day before the Ukraine invasion, when it took 78.8 rubles to reach $1.

The bank said annual inflation fell to 15.9 percent in June, compared with 17.1 percent in May, and estimated it had eased to 15.5 percent as of July 15. It cited “flat consumer demand” and the ruble’s exchange rate for the drop

Central bank chief Elvira Nabiullina told a press conference, “The recent involuntary accumulation of savings is a compressed spring in the economy, which in certain circumstances could lead to a dramatic increase in consumption.” Products and services are limited.”

The bank expects inflation to continue to moderate — to 12-15 percent this year, 5-7 percent in 2023 and 4 percent in 2024.

Interest rates have been cut as central banks around the world scramble to tackle inflation as a result of Russia’s actions in Ukraine. The European Central Bank made a bigger-than-expected increase of half a percentage point on Thursday as higher energy costs linked to military operations pushed up consumer prices to 8.6 percent.

These fuel costs benefit Russia, a major oil and natural gas exporter. Despite rising energy revenues and the central bank moving indicators such as exchange rates forward, the long-term impact of Russia’s global isolation will deepen economic stagnation and lower incomes for its people, economists say. (AP)

(This is an unedited and auto-generated story from a syndicated news feed, most recent staff may not have changed or edited the content body)

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