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Russian authorities unlikely to raise base rates

Despite the fact that the Russian government recently announced the introduction of a ban on the export of grain due to the terrible drought sweeping across Russia, it is unlikely that the central bank will increase Russian base rates in the short-term. While there is obviously a major problem within Russia there are further issues around the world as the price of grain has moved ahead by 30% in the last seven days.

Inflationary pressure is the last thing which worldwide governments need at this moment in the economic cycle because cheap funding is required to support even the merest hint of an economic upturn. With central banks around the world unlikely to risk further economic downturns in the short-term it is likely that we will see inflation push ahead in the short to medium term which is something of a gamble on the side of central banks around the world. However, do they have any option?

An increase in base rates around the world would kill the supply of cheap finance which would effectively kill any chance of an economic recovery in the foreseeable future. These are the very difficult decisions which central banks around the world are having to consider on an almost daily basis.

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