Rus­sian cbank may raise in­ter­est rates as fo­cus shifts to in­fla­tion

The Pak Banker - - Front Page -

MOSCOW: Rus­sia's cen­tral bank said it may in­crease in­ter­est rates in the first quar­ter, sig­nal­ing that pol­icy mak­ers are shift­ing their fo­cus to in­fla­tion even as the re­cov­ery from last year's slump slows.

"In­fla­tion is be­gin­ning to worry us," Chair­man Sergey Ig­natiev told re­porters yes­ter­day in Moscow. The cen­tral bank will "pri­mar­ily" use its in­ter­est-rate pol­icy to con­trol ris­ing prices, he said.

Pol­icy mak­ers are weigh­ing the first rate in­crease since 2008 af­ter in­fla­tion ac­cel­er­ated to the fastest in 11 months in Novem­ber. The cen­tral bank kept its main re­fi­nanc­ing rate at 7.75 per­cent for a sixth month on Nov. 26 as pol­icy mak­ers sought to keep a lid on prices with­out damp­ing the econ­omy's re­cov­ery from a 7.9 per­cent slump last year.

The an­nual in­fla­tion rate may reach 8.4 per­cent this year af­ter higher food costs and a weaker ru­ble fanned price­growth, Ig­natiev said yes­ter­day. The worst drought in at least half a cen­tury trig­gered crop losses and drove up food costs af­ter price growth slowed to a record low 5.5 per­cent in July.

While Bank Ros­sii said Nov. 26 that it was com­mit­ted to "mon­e­tary stim­u­lus," the bank's state­ment omit­ted a pre­vi­ous pledge to main­tain that pol­icy "for the com­ing months." "Rus­sia's cen­tral bank is hawk­ish on rates amid in­fla­tion pres­sure, ad­mit­ting re­fi­nanc­ing rates could be hiked in the first quar­ter," VTB Cap­i­tal an­a­lysts led by Dmitry Dmitriev in Moscow said yes­ter­day in a note to clients. "We also stress the mount­ing prospect of a rate hike in early 2011."

Bank Ros­sii may lift the bench­mark rate by a quar­ter point by the end of March, ac­cord­ing to the me­dian es­ti­mate of 19 econ­o­mists sur­veyed by Bloomberg. Traders are pric­ing in 0.58 per­cent­age points of in­creases over the next three months, for­ward rate agree­ments show. -PB News

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