Dropping oil prices and the extension of western sanctions have left Russia in a similar unfavourable situation, reminiscent of last year. This is affecting the Russian economy negatively, which is heavily dependent on exports of gas and oil.
This weekend saw the ruble drop by 12% against the US dollar over July, and inflation is soaring. The recession is definitely being felt, with unemployment rates rising and many finding themselves in poverty due to a sharp fall in wages.
As a result of the above occurrences, the Bank of Russia decided it would be best to further lower interest rates to 11%. It is hoped to prevent the economy lowering, whilst being careful not put more pressure on the ruble and risk even higher inflation.
The Bank of Russia issued a statement:
‘Whether the economic situation in Russia will further improve, depends on the dynamics of world energy prices and the economy’s ability to adapt to external shocks. At the same time, the scenario of oil prices remaining so low for such a long time is more likely this month than it was in June.’
Yearly inflation should decrease sharply at the start of 2016, before dropping to its estimate of 4% in 2017, the bank added.