Russia’s central bank cuts its benchmark interest rate to 16% as military spending fuels inflation and strains public finances
MOSCOW: Russia’s central bank has cut its benchmark interest rate to 16%.
The move comes as the economy sags under the financial burden of the Ukraine offensive and Western sanctions.
Moscow has ramped up military spending to fund its campaign, spurring two years of rapid growth that is now straining public finances and price stability.
The spending pushed up inflation, weighing on real growth, while businesses have complained about high borrowing costs.
Earlier this month, Russia reported the steepest drop in annual inflation so far this year.
In November, inflation fell to 6.6% compared to 7.7% a month prior.
The bank said it “will maintain monetary conditions as tight as required to return inflation to the target” of 4% a year.
“We must do everything possible to ensure that the Russian economy, the macroeconomy, is healthy and strong,” Russian President Vladimir Putin said on the cut.
State statistics agency Rosstat expects annual inflation to ease to the 4% target only in 2027.
To plug a budget gap running at around USD 50 billion so far this year, the Kremlin has raised taxes on citizens and businesses. – AFP
