The Russian Central Bank surprisingly cuts its reference rate

After drastically raising its key rate from 9.5% to 20% in the wake of the first European sanctions after the war in Ukraine, Russia just lowered it to 17% on Friday 8 April.

A “surprise” reduction justified by the fact that “The risks to financial stability are still present, but for now they have ceased to increase”, notes the Bank of Russia in a press release, particularly due to the strict capital controls it has put in place. The reduction will take effect from Monday 11 April.

Russia is facing the worst situation of the last 30 years, says the Russian Prime Minister, even more pessimistic than Biden

With the strengthening of the ruble, largely artificial but with a strong symbolic charge, this decision is considered a success for the Central Bank, a sign that the draconian measures of capital and currency controls have worked.

The Bank found that a “regular inflow of funds” occurred on bank accounts and that a “Significant slowdown in the growth rates of current prices, due in particular to the dynamics of the ruble” it was happening.

March inflation data is expected later today. Breaking acceleration records at the start of the month, they still slowed down in the last week of March. The ruble, which had fallen to unprecedented levels in February and March, has largely recovered to its level before Russian troops entered Ukraine.

The Central Bank has hinted that a further cut could take place at the next meeting, scheduled for April 29th. The central bank appears “Confident that the most acute phase of the economic crisis has passed”, Capital economics analysts assure in a note. The swift measures taken by the Bank in February and March “prevented an important and destabilizing bank run”.

War in Ukraine: “Our sanctions will cancel fifteen years of economic progress in Russia” (Joe Biden)

Opposite trend to the rest of the world

Unlike Russia, the rest of the world’s central banks have opted for a hike in their benchmark rate in recent weeks to try and tackle inflation. Recall that the rise in key rates pushes commercial banks to offer higher interest rates for loans to their customers, for example for the purchase of a house, a car or even a television. This should therefore slow down consumption, to ease the pressure on prices. At the risk, however, of weighing on economic growth.

A first since 2006 in the United States: the interest rate of the five-year loan higher than that of the 30-year

Thus, this week, the Polish central bank (NBP) announced the increase of its main reference rate to 4.50%, up from 3.5% a month ago, in order to curb inflation which in March. has exceeded the 10% threshold. This is the seventh consecutive increase in seven months.

Most impressively, the Central Bank of Zimbabwe announced on Monday April 4 that it had raised its key benchmark rate from 60% to 80%. This rate is currently the highest in the world and sets an all-time record for this southern African country, according to financial agency Bloomberg. The increase comes as Zimbabwe grapples with inflation which hit 72.7% in March from 66.11% the month before.

In March, the Central Bank of the United States opted for a cautious increase of a quarter of a percentage point, now placing its rates in a range between 0.25% and 0.50%. There also seems to be a consensus among several monetary institution leaders for one or more major rate hikes in 2022. As with the Bank of England, it has also already raised the interest rate by 0.25 percentage points to zero. 75% (its pre-pandemic level). The European Central Bank hasn’t done so yet, but has announced it could raise interest rates this year.

War in Ukraine does not threaten European banks: European Banking Authority

Food inflation record

World food prices hit their mark in March “Highest levels ever recorded” due to the war in Ukraine, the United Nations Food and Agriculture Organization (FAO) announced on Friday 8 April.

The FAO Food Price Index, which tracks the monthly change in international prices of a basket of basic food products, had already broken the record in February since its creation in 1990, and recorded a further 12.6 increase in March. .%, the organization said in a statement.

This increase is mainly due to the FAO Cereal Price Index, which “It recorded an increase of 17.1% compared to February, under the effect of the sharp increases in the prices of wheat and all large cereals, mainly due to the war in Ukraine”. Food prices are also driven by vegetable oils, of which the FAO index “it jumped by 23.2%, driven by the increase in the price of sunflower oil, of which Ukraine is the world’s largest exporter”. At the same time, the prices of palm, soybean and rapeseed oils also increased significantly. “due to the increase in global import demand due to disruptions in the supply of sunflower oil.”

Food: 81% of product categories are affected by inflation

(With AFP)

The Bank found that a “regular inflow of funds” occurred on bank accounts and that a “Significant slowdown in the growth rates of current prices, due in particular to the dynamics of the ruble” it was happening.

March inflation data is expected later today. Breaking acceleration records at the start of the month, they still slowed down in the last week of March. The ruble, which had fallen to unprecedented levels in February and March, has largely recovered to its level before Russian troops entered Ukraine.

The Central Bank has hinted that a further cut could take place at the next meeting, scheduled for April 29th. The central bank appears “Confident that the most acute phase of the economic crisis has passed”, Capital economics analysts assure in a note. The swift measures taken by the Bank in February and March “prevented an important and destabilizing bank run”.

War in Ukraine: “Our sanctions will cancel fifteen years of economic progress in Russia” (Joe Biden)

Opposite trend to the rest of the world

Unlike Russia, the rest of the world’s central banks have opted for a hike in their benchmark rate in recent weeks to try and tackle inflation. Recall that the rise in key rates pushes commercial banks to offer higher interest rates for loans to their customers, for example for the purchase of a house, a car or even a television. This should therefore slow down consumption, to ease the pressure on prices. At the risk, however, of weighing on economic growth.

A first since 2006 in the United States: the interest rate of the five-year loan higher than that of the 30-year

Thus, this week, the Polish central bank (NBP) announced the increase of its main reference rate to 4.50%, up from 3.5% a month ago, in order to curb inflation which in March. has exceeded the 10% threshold. This is the seventh consecutive increase in seven months.

Most impressively, the Central Bank of Zimbabwe announced on Monday April 4 that it had raised its key benchmark rate from 60% to 80%. This rate is currently the highest in the world and sets an all-time record for this southern African country, according to financial agency Bloomberg. The increase comes as Zimbabwe grapples with inflation which hit 72.7% in March from 66.11% the month before.

In March, the Central Bank of the United States opted for a cautious increase of a quarter of a percentage point, now placing its rates in a range between 0.25% and 0.50%. There also seems to be a consensus among several monetary institution leaders for one or more major rate hikes in 2022. As with the Bank of England, it has also already raised the interest rate by 0.25 percentage points to zero. 75% (its pre-pandemic level). The European Central Bank hasn’t done so yet, but has announced it could raise interest rates this year.

War in Ukraine does not threaten European banks: European Banking Authority

Food inflation record

World food prices hit their mark in March “Highest levels ever recorded” due to the war in Ukraine, the United Nations Food and Agriculture Organization (FAO) announced on Friday 8 April.

The FAO Food Price Index, which tracks the monthly change in international prices of a basket of basic food products, had already broken the record in February since its creation in 1990, and recorded a further 12.6 increase in March. .%, the organization said in a statement.

This increase is mainly due to the FAO Cereal Price Index, which “It recorded an increase of 17.1% compared to February, under the effect of the sharp increases in the prices of wheat and all large cereals, mainly due to the war in Ukraine”. Food prices are also driven by vegetable oils, of which the FAO index “it jumped by 23.2%, driven by the increase in the price of sunflower oil, of which Ukraine is the world’s largest exporter”. At the same time, the prices of palm, soybean and rapeseed oils also increased significantly. “due to the increase in global import demand due to disruptions in the supply of sunflower oil.”

Food: 81% of product categories are affected by inflation

(With AFP)