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Economic fallout in Russia’s central bank projects

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Economic fallout in Russia’s central bank projects

The governor of Russia’s central bank, Elvira Nabiullina, said on Friday that the country’s economy will decline in the coming quarters and inflation will rise further as sanctions imposed after the invasion of Ukraine take effect. Earlier, the bank’s board of directors had kept the interest rates at 20 per cent.

Interest rates dramatically doubled to 9.5 percent on February 28, and capital controls curbing the movement of money helped maintain financial stability and prevent uncontrolled price hikes in Russia, the bank said. But the latest inflation data shows that, as of March 11, prices in Russia rose 12.5 percent from a year earlier.

Russia’s war against Ukraine has led to strict economic sanctions from the United States and Europe, encouraged large numbers of Western companies and banks to withdraw from the country, and isolated Russia from the global financial system. .

“The Russian economy is entering a phase of massive structural change, which will be accompanied by a temporary but inevitable period of inflation,” the Russian central bank said in a statement on Friday.

Ms. Nabiullina later said, “Gross domestic product will decline in the next quarters.” Two consecutive quarters of economic decline are generally considered to be recessions.

The impact of sanctions is being felt in Russia.

“Today, almost all companies are facing disruption in production and logistics chains and in their settlements with foreign counterparts,” Ms. Nabiullina said. He said inflation was higher due to increased demand for cars, home appliances, electronic equipment and other goods, as people rushed to buy because they feared prices would rise higher and supply would run out.

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The ruble has lost about 30 percent of its value against the US dollar this year.

Russian President Vladimir V. Putin on Friday extended Ms. Nabiullina for another term as governor of the central bank. He has been in this position since 2013. Ms Nabiullina also said on Friday that stock trading on the Moscow Exchange would remain closed but government bond trading would resume on Monday. The stocks have not traded on the exchange since February 25.

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