FRANKFURT, Germany — Russia’s central bank made a smaller than usual interest rate cut on Friday, a compromise move to support stagnating economic growth even as inflation fueled by war spending remains higher than the bank’s target.
The quarter-point cut to 14% shows the bank slowing its pace of rate cuts from a peak of 21% last year
The bank had been cutting by at least a half-percentage point until a quarter-point cut on June 19. The slowing pace of cuts appears to be a compromise between complaints from Russia’s business lobby about high rates and the central bank’s aim of reducing inflation to its target of 4% annually. High rates combat inflation but make life more expensive for businesses that want to borrow to invest or cover expenses.
On Wednesday, Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs business association, warned of a wave of “autumn bankruptcies” if the central bank maintained its rate level. Russia’s economy held up better than many expected despite Western sanctions after Putin launched the invasion of Ukraine. The budget has been supported by continuing exports of oil, while military orders kept factories running.