Kimppis wrote:Alexander Mercouris: Russian Central Bank cuts key rate to 9.75%, optimistic about Russian economy
"To be clear, this is a token cut that will not by itself make any difference to the state of economy. Its importance is that it clearly signals that more cuts are on the way. That may in itself act as a spur to growth, consolidating the recovery."
"The state of Russia’s economic statistics is at the moment one of confusion, with Rosstat – Russia’s state statistical agency – admitting what many people – including myself – always suspected, that it had previously seriously overestimated the severity of the recent recession, which was significantly shorter and shallower than it had previously said. Rosstat is now in the process of undertaking a comprehensive review both of its methodology and of its earlier calculations. However this process is far from complete, so it is difficult at present to give a precise picture of the current state of the economy."
"A never stated fact about the Russian economy is that every contraction since 1991 has been shorter and shallower than its predecessor. The contractions of 1991 and 1998 were existential crises that threatened the very existence of the Russian state, whilst the 2008 recession, though significantly less severe, was still (as Nabiullina’s figures show) a very steep recession indeed and something of a near death experience. The latest 2014-2015 recession was by these standards not merely short and shallow, but qualifies as Russia’s first ‘normal’ recession. As I have discussed many times, its overall effect has been to leave the Russian economy fitter and stronger than it was before."
I already posted that the 2014-2015 recession was shallow without requiring Rosstat revisions. People can look at the GDP drops in 2009 and
the cumulative drop 2014 and 2015 to see that the 2008-2009 recession was more intense. The other detail is that the recovery was faster
by looking at the GDP curve even if there was no growth in 2016. The CBR can see the situation perfectly fine and all is bleating about
inflation is utter BS.
The CBR leaves everyone in Russia guessing what it will do. This is not a rational central bank policy. Given the large drop in the inflation
rate the CBR should have reduced the prime rate to under 8% instead of hovering around 10%. It is clear that the CBR is foisting essentially
a 10% rate on Russia regardless of the CPI. This means the banks are charging businesses on the order of 12% (consumer loans cost 20%
https://russia.deposits.org/). All this while the CPI is about 6%. Since the CBR increases the CPI directly with its interest rate, the current
inflation reduction in Russia is due to a great extent to economic constriction (i.e. prices are kept under control by lack of demand and companies
that can't afford to pay the CBR protection fee go bankrupt). This is simply criminal.