Russia’s rate cut to do more harm than good, analysts say

Russia’s surprise cut in its key interest rate to 15 per cent from 17 per cent on Friday was primarily a product of political pressure and may do more harm than good to Moscow’s twin aims of restraining inflation while softening the impact of an incipient recession, analysts said.

“The CBR’s (Central Bank of Russia) move will likely have quite a reverse effect on inflation,” said Vladimir Tikhomirov, chief economist at BCS Financial Group, a Russian investment bank. “The market is already increasing pressure on the rouble which, in turn, will transform into higher – rather than lower – inflationary expectations going forward.”