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Investing.com -- In a surprise move on Friday, the Russian central bank reduced its key interest rate by one percentage point, bringing it down to 20%. This marks the bank’s first easing since September 2022.
The bank released a statement indicating that economic growth was slowing and inflation was decelerating. The bank noted that while domestic demand growth still surpasses the capacity to increase the supply of goods and services, the Russian economy is slowly moving towards a balanced growth path.
This decision contradicted predictions from a poll which anticipated that the central bank would maintain the key rate. The rate had been set at 21% since October of last year in an attempt to control inflation in the economy, which has been geared towards supporting the military efforts in Ukraine.
The rouble’s 40% rally against the dollar since the start of the year has aided the central bank in its battle against inflation by reducing the cost of imported goods. U.S. President Donald Trump’s efforts to facilitate negotiations between Russia and Ukraine have largely contributed to the rouble’s strength.
However, the rouble experienced a 2.7% drop against the U.S. dollar on Friday. The central bank cautioned that a global economic slowdown and declining oil prices due to trade wars could potentially lead to a rise in inflation through a weaker rouble.
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