Russian central bank cuts key interest rate

Russia’s central bank has cut a key interest rate, which it had hiked in previous months to support the rouble, in order to help the economy.

The rouble dropped 1.6% to 69.8 roubles against the dollar following the announcement.

Higher rates can help a currency, but also hurt economic growth by making loans more expensive.

The bank raised the rate to 17% late last year in a last-ditch attempt to curb the devaluation of the rouble – which has lost more than half of its value.

The bank today cut it back down to 15%, saying it views the risks of an economic slowdown are now higher than fears of a spiralling inflation.

Russia’s economy has been battered by lower energy prices and Western sanctions.

Earlier, a top Russian official accused a leading rating agency of trying to turn tycoons against the Kremlin.

Standard & Poor’s this week downgraded Russia’s credit rating to a non-investment grade, for the first time in more than a decade.

In remarks in parliament on Friday, Deputy Prime Minister Igor Shuvalov said the goal of the downgrade was to push businesses “to withdraw their support” for the government and President Vladimir Putin.

Russia has exceptionally low levels of public debts level for a country with a “junk” status but the downgrade underlined investors’ fears about the unpredictability of Mr Putin’s foreign policy and the collapse of the rouble.

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