Sunday, February 21, 2010
Russia Cuts Interest Rates
Russia's central bank has just cut their interest rates by one quarter of a percentage point. This move has been done to try to get the banks to start lending. The cut was also made to limit the foreign short term capital, and the government had concerns about the ruble future. Russia has one of the highest interest rates of the Group of Eight Leading Nations, so this effort to cut interest rates has seen its effect by making the ruble stronger which was a concern for the banks.
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Russia is probably trying to encourage the investors to invest in Russia. But if we consider perfect capital mobility then why would any investor invest in Russia while they can invest in booming conomies as China. I doubt Russia's move to cut the interest rate while other countires like China is trying to tame the inflation by strong monetary policy. May be this will encourage some investors to invest in Russia.
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