The recovery in Russia and its related exchange traded fund has been slow going, but the Central Bank has stepped in to give the economy a much-needed jump start.
In an attempt to spur bank lending and limit inflows of short-term foreign capital, Russia’s Central Bank reduced its benchmark refinancing rate by 0.25% to 8.5% and reduced the repo rate to 7.5%, reports Polya Lesova for MarketWatch. Consumer price inflation dropped to 8% in January and is expected to further decline. [Things Going for Russia.]
The Russian economy is estimated to grow around 3.5% this year. The manufacturing sector and consumer demand both remain below pre-crisis levels.
It’s believed that the Central Bank has intervened in the currency markets to slow the ruble’s advance, which has strengthened beyond its 35.0 level against the dollar/euro currency basket.
Violeta Klyviene, senior analyst at Danske Bank, commented that the weakening ruble may limit how much the Central bank can lower rates and the “possible scaling back of quantitative easing in the United States and tighter monetary conditions in Asia also limits the room for Russian rate cuts.”
In January, industrial output in Russia jumped 7.9% year-over-year, according to the Associated Press. The Federal Statistics Service reported that industrial output dropped by 10.8% last year. Car and locomotive manufacturing increased by three-fold year-over-year.
Russian President Dmitry Medvedev wants to speed up the Russian economy’s modernization to meet a 25% CO2 reduction target by 2020, as stated in NASDAQ. Medvedev says Russia’s climate doctrine might also be revised to fit the changing conditions. [Why Russia is Moving Beyond Oil.]
- Market Vectors Russia (NYSEARCA:RSX)
Max Chen contributed to this article.