![]() ![]() But the rally is based on expectations of supply reductions which, so far, have not happened.” “The oil price has also performed better than had been expected. “The key risk remains a resumption of heavy fighting in eastern Ukraine,” he warned. Macro-advisory analyst Chris Weafer warned in a recent report that Russia’s financial situation was “far from safe”. 12, and there are widespread fears of renewed fighting. The situation in eastern Ukraine remains fragile, with both sides accusing the other of violating the peace deal reached on Feb. “The oil price is perhaps the greatest risk for Russia, since a further bout of price weakness is a serious possibility in the next six to 12 months,” Trusted Sources’ Granville said. International oil benchmark Brent was trading at $66 per barrel on Thursday, close to its 2015 highs, but some analysts warn that the oil price could fall back towards $50 per barrel as the market remains oversupplied. Neither the rouble nor the Russian economy are out of the woods yet,” said Nicholas Spiro, managing director at Spiro Sovereign Strategy in London. “There is an inescapable fear that these rate cuts will have to be undone. There has also been a revival of portfolio investment inflows and many major Western companies have shown confidence in Russia by staying put.Īnalysts caution, however, that the rouble and economy remain vulnerable to fresh upsets. Western leaders hoping the sanctions might fuel opposition to Putin have been disappointed. The Russian currency fell by about 40 percent last year, at one point touching an all-time low of 80 per dollar.īut the rouble is now back at around 51.5 to the dollar, and President Vladimir Putin told the nation this month that he expects the economy to return to growth in two years or less.įinance Minister Anton Siluanov has declared the worst of the crisis over, largely thanks to a partial recovery in oil prices and an easing of fighting following a truce in east Ukraine. ![]() The central bank raised its main lending rate by a total of 11.5 points last year, including a dramatic hike in December to 17 percent from 10.5 percent, to try to halt the rouble’s decline. ![]() “But for now inflation and inflationary expectations remain quite high and this probably restrained (the central bank).” “The rouble was pricing in a bigger reduction - in the region of 200 basis points,” VTB Capital analyst Maxim Korovin said. The rouble briefly pared losses after the central bank announcement before drifting back down. The central bank said inflation expectations remained high but that it would be ready to make further rate cuts if inflation slows from its current 16.5 percent as expected. “The rate cut fell short of those on the radical end of the spectrum while reflecting the bank’s commitment to moving steadily and sequentially to bring down its key rate.” “This looks like a compromise decision,” said Christopher Granville, managing director at Trusted Sources consultancy in London, after the bank cut its one-week minimum auction repo rate from 14 percent. In resisting a larger cut, the bank showed it remains worried about inflation and financial stability, especially with sanctions still in place and a truce in eastern Ukraine between pro-Russian separatists and government forces looking shaky. ![]()
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