Russian Central Bank Holds Interest Rate at 8.25%

The Central Bank of Russia held its benchmark refinancing rate steady at 8.25%.  The Bank said: "Considering recent domestic and international macroeconomic developments the Bank of Russia judged that the current level of money market interest rates was appropriate to balance the inflationary risks and the risks of economic growth slowdown.  The increase in money market interest rates, resulting from the transition to the liquidity shortage in the banking sector together with the instability on the global financial markets, puts upward pressure on other interest rates in the economy.  Thereupon the Bank of Russia will continue to monitor the money market conditions and the external economic developments, and to assess the risks of further increase in the market interest rates and its consequences."


The Russian central bank previously also left interest rates unchanged, while it last raised the fixed overnight deposit rate by 25bps to 3.50% in May, and the benchmark refinancing rate by 25 basis points to 8.25% in April this year.  Russia reported annual inflation of 7.2% in September and October, down from 8.2% in August, 9% in July, and 9.4% in June, meanwhile Bank Chairman Sergey Ignatiev is trying to keep inflation between 6% and 7%.  

Russian economic growth was recorded at 5.2% y/y in Q3 this year, compared to 3.4% in Q2, 4.1% in Q1, and 4.5% in the December quarter of 2010; the IMF is expecting 4.5% growth for the full year.  The Russian Ruble (RUB) has weakened about 3% against the US dollar this year, while the USDRUB exchange rate last traded around 31.56

www.CentralBankNews.info