Russia's Economy Faces Hypothermia Amid High Interest Rates

Russian Economy Minister Maxim Reshetnikov has urged the central bank to take the country's slowing inflation into account when setting interest rates, as he warns of signs of economic 'hypothermia'. Despite the cooling economy, the central bank maintains a high interest rate of 21% to combat persistent inflation.

President Vladimir Putin previously cautioned against treating the economy like a 'cryotherapy chamber' with restrictive borrowing costs, seen by analysts as an appeal for rate cuts. Reshetnikov, speaking in the State Duma, pointed to recent recalculated annual inflation rates of 3-4% as evidence of the need to reconsider monetary policy.

On the ground, major Russian exporters such as Rusal and Gazpromneft are pulling back on commodity shipments, reflecting decreased demand. The central bank's forthcoming meeting on June 6 is anticipated to address these challenges as economic forecasts loom with cautiously optimistic annual inflation predictions for 2025.

(With inputs from agencies.)