Putin Fingerprints Seen All Over Surprise Interest-Rate Reversal
(Bloomberg) — The message some Russia watchers are getting from Friday’s surprise interest-rate cut is this: Start listening more to what President Vladimir Putin’s aides say about monetary policy and less to central bankers.
Here’s the key evidence. In comments made just nine days ago, the country’s central bank chief indicated she saw no chance of a rate cut any time soon after inflation soared to a five-year high. A week earlier, though, one of Putin’s most vocal economic aides urged the exact opposite, saying a reduction was needed to bolster the ailing economy.
So when the Bank of Russia shocked traders and analysts alike by announcing it was lowering the benchmark rate from an 11-year high, the words spoken by that aide, Andrey Belousov, left many to speculate that the Kremlin is exerting more pressure on central bank policy makers. The rate cut — to 15 percent from 17 percent — triggered a wave of ruble selling that drove the currency down as much as 4 percent, adding to a year-long selloff that’s left it down 50 percent percent against the dollar.
The rate cut “was useless — it will only put more pressure on credibility,” said Vladimir Miklashevsky, a strategist at Danske Bank A/S. “They change their mind so fast but the environment is not really changing. This move is pure giving in to pressure from society, pressure from the government.”
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