Russia’s central bank may want to consider lowering interest rates in June after two increases this year that are adding to the country’s slide toward recession, Economy Minister Alexei Ulyukayev said.
“I think the March increase from 5.5 percent to 7 percent was absolutely correct,” Ulyukayev, a former first deputy central bank head who oversaw monetary policy, told reporters in Russia’s Kaliningrad region today. “As far as the April increase from 7 percent to 7.5 percent, I’m not sure that was absolutely correct.”
Russia is facing the prospect of a technical recession because the economy may fail to grow or even contract 0.1 percent in the second quarter compared to the previous three months, when gross domestic product fell by 0.5 percent, he said. The International Monetary Fund said April 30 that Russia is already in recession.
The U.S. and the European Union have said they’re willing to add to sanctions imposed after Russia annexed the Crimean peninsula in March if President Vladimir Putin doesn’t do more to quell unrest in Ukraine. Russian Prime Minister Dmitry Medvedev yesterday ordered OAO Gazprom, the country’s gas-export monopoly, to take a tougher stance on collecting payment from Ukraine, risking a cutoff in supplies.
The ruble has weakened 5.9 percent against the dollar this year, the second-worst performance among 24 emerging-markets currencies tracked by Bloomberg after Argentina’s peso. The Russian currency pared losses for the year after Putin called on Ukraine’s Donetsk and Luhansk regions on May 7 to postpone referendums on greater autonomy they held May 11.
The threat of sanctions is “more dangerous” for the economy than the effects of actual measures because it dries up investment, Ulyukayev said. The central bank’s plan to offer refinancing for banks that loan to spur investment projects will be in demand, he said.
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