(Bloomberg) — Russia’s central bank unexpectedly cut its key interest rate the most in nearly two decades, offering relief to the recession-bound economy in a sign of confidence it can start to reverse some of the steep monetary tightening delivered after the invasion of Ukraine.
The central bank lowered the rate to 17% from 20% at an unschedueld meeding on Friday and said further cuts could be made in the months ahead if conditions permit. The ruble briefly halted its rebound against the dollar and local bond yields tumbled after the decision.
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“The central bank wants to be a locomotive of the economic rebound, not a brake,” said Luis Saenz, head of international distribution at Sinara.
Sweeping international sanctions have touched off inflation and put the world’s biggest energy exporter on track for a deep, two-year recession while pushing the Russian government to the edge of default.
But continuing inflows of energy revenues and tough capital controls — including a ban on foreigners selling Russian assets as well as mandated hard currency sales by exporters — have helped the ruble regain ground.
“External conditions for the Russian economy are still challenging, considerably constraining economic activity,” the central bank said in a statement. “Financial stability risks are still present, but have ceased to increase for the time being, including owing to the adopted capital control measures.”
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It’s a policy pivot that echoes Governor Elvira Nabiullina’s surprise 200 basis-point rate cut in 2015, which reversed an emergency hike made weeks earlier. At the time, Russia was entering an economic contraction following the first round of sanctions over Ukraine and the collapse in oil prices.
Yields on government ruble bonds tumbled 83 basis points to 11.19% as of 1:31 p.m. in Moscow on Friday. Russia’s currency briefly erased gains after the rate cut, before resuming its advance and trading 0.7% stronger at 75.2250 per dollar.
The currency on Wednesday advanced past 81.16 in Moscow trading, the level it closed at on Feb. 23 — the day before President Vladimir Putin launched his attack.
“The ruble is very strong,” said Natalia Orlova, economist at Alfa-Bank. “This reduces the horizon of inflation risks.”
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Nabiullina acted three weeks before a scheduled rate meeting, as pressure builds against Russia in response to reports that the country’s forces committed apparent war crimes in Ukraine. On Friday, Japan announced it will ban imports of Russian coal, a day after a similar decision by the European Union.
The Group of Seven leaders issued a statement saying that the countries will ban new investment into Russia’s energy sector and expand trade restrictions, including phasing out and banning coal imports.
Still, weekly inflation has shown signs of easing, a slowdown the central bank said can in part be attributed to a stronger ruble.
The Bank of Russia’s emergency rate hike in February and restrictions on foreign-exchange transactions were sufficient to lower risks for the financial system, according to Sova Capital economist Artem Zaigrin. It’s now having to react quickly to an unfolding crisis, he said.
“Thanks to these actions, the central bank was able to stop the outflow of funds from the banking system and restore the attractiveness of deposits,” he said. “At the moment, the growing level of uncertainty in the economy and the sharp decline in demand have become prevalent.”
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
