Russia is doomed

Breaking at Bloomberg: The Central Bank of Russia has raised its key interest rate from 10.5 to 17 percent. This hearkens back to a post I published on Friday regarding divergence among central banks with regard to monetary policy stance. Some face looming deflation (or at least disinflation), like the ECB and Bank of Japan. Others allegedly face inflation, like the Fed (though I’ve expressed my disillusionment with that theory in that same post I cite above). The Central Bank of Russia obviously falls into the latter camp.

Interestingly, the Central Bank of Russia cites existing sanctions on Russia in the first paragraph of its December Summary. Might this hint at more aggressive action to come on the part of Putin to remove these sanctions? The Summary also predicts -4.5% to -4.7% GDP growth in 2015 should oil prices remain at $60 per barrel through 2017. In short, disaster looms. A Washington Post headline tonight literally says “Russia’s economy is doomed.”

I’d like to research the interest rates moves that led up to this hike. I’d like to look for similarities with the Fed’s monetary stance—whether we can learn anything from Russia’s experience with monetary easing that applies in the U.S. I’ll do that tomorrow.

On a related note, that Summary is horribly written (or at least horribly translated). Can they not afford a professional?

Posted by Nick Freiling

Founder/Director of PeopleFish. I write on technology, market research and economics. Bylines at Startup Grind, FEE, the American Enterprise Institute and the Mises Institute.

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