Mike Shedlock

Ukraine and Russia remain in the spotlight this weekend. Here are the top stories.

  1. Russia hiked interest rates 50 basis points on Friday accompanied with a warning about inflation and a sluggish economy.
  2. Russian Markets Have Worst Week Since Crimea.
  3. Ukraine's acting prime minister accused Russia of wanting to start WWII.
  4. Ukraine forces barricade the rebel stronghold of Slavyansk

Russia Issues Downbeat Economic Statement

The World Politics Journal notes Russia’s central bank issues a downbeat statement on the Russian economy.

On Friday, April 25th, Russia’s central bank raised its benchmark interest rate by 50 basis points to 7.5 per cent, giving higher inflation risks as a reason behind its decision.

‘The probability of inflation exceeding the 5% target at the end of 2014 has increased substantially’, the Russian central bank said in a statement.

Annual inflation stood at 7.2 per cent as of Monday, April 21st. However, the central bank estimates that inflation would not exceed 6 per cent by the end of 2014.

The Russian economy expanded 1.3 per cent in 2013, the slowest pace of growth since a 2009 recession. For comparison, the economy grew by 3.4% in 2012. The Bank of Russia said in a downbeat statement on the economy: ‘Labour productivity growth is sluggish, while fixed capital investment continues to contract because of declining profits in the real sector, limited access to long-term financing in both international and domestic markets, as well as low producer and consumer confidence.

The Russian central bank predicts that the country ‘will continue to witness a downward trend in economic growth’ in 2014, adding ‘Amid economic uncertainty and declining producer confidence there is a strong probability of a reduction in fixed capital investment. Combination of slower growth in real wages and a decline in household lending growth rates will have a dampening effect on consumer activity’.

Mike Shedlock

Mike Shedlock is a registered investment advisor representative for Sitka Pacific Capital Management.

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