Russian cbank may raise interest rates as focus shifts to inflation
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