Russian Central Bank cut its interest rate from 17 percent to 15 percent

The Russian Central Bank in the end of January 2015 announced to cut its key interest rate from 17 percent to 15 percent following the fear of recession.

The move implies a shift in the Bank of Russia's priorities away from clamping down on rising inflation and supporting the ruble, towards trying to support economic activity, which the bank expects to fall sharply in the coming months.

Earlier in December 2014, the Bank of Russia had hiked the interest rates by 6.5 percent. The measure was intended to head off a collapse in the value of the ruble, which fell to an all-time-low of 80 rubles to One dollar and 100 rubles to One euro in December 2014.

However, the sharp rate hike put pressure on the country's already struggling economy, which was being buffeted by a combination of collapsing oil prices and Western economic sanctions over Russia's role in the ongoing crisis in Ukraine.

Comment

The decision will fuel speculation that recent changes in the bank's senior management have shifted the bank towards more dovish monetary policy, possibly under pressure from the Kremlin, banks and business lobbies.

The shift in policy may also reflect the realisation that Russia's economy is heading for a hard landing as low oil prices look set to persist and the conflict in Ukraine has worsened, defying hopes of an early end to Western sanctions.