"Russia's central bank cut its key interest rate to the level it was at when the country was sanctioned in late February in a sign that the economy is weathering some of the pain caused by Western sanctions.
Explaining Friday's move, the central bank said inflation has started to fall back from a postsanctions surge sooner than it had expected, thanks in large part to the ruble's rebound.
The decision highlights the dilemma faced by the West as its efforts to punish Moscow are being partly offset by Russia's gains from higher oil and gas prices, which the country benefits from as an exporter.
The Bank of Russia lowered its key interest rate to 9.5% from 11%, the fourth cut since early April.That series of rate cuts has reversed a doubling of the key rate in the immediate aftermath of Russia's sanctions.
The central bank said further reductions in the key rate are possible as it seeks to support an economy that has been contracting, even if the damage done by sanctions has been smaller than policy makers had forecast in April.
"Sanction effects haven't manifested themselves as strongly as we anticipated," Bank of Russia Gov. Elvira Nabiullina told reporters. "That demonstrates the ability of companies to adjust."
However, she said it was still possible that sanctions would take a big toll on the economy.
"To say that the sanctions have manifested themselves in full is premature and the situation is uncertain," Ms. Nabiullina said at a press conference held after the decision to cut the key rate.
In April, the central bank said it expected the economy to contract by between 8% and 10% this year. On Friday, it said the contraction may be smaller than that." [1]
1. World News: Bank of Russia Cuts Key Rate to Before Sanctions Level
Hannon, Paul.
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 11 June 2022: A.8.
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