Rus­sia re­frains from rate in­crease as in­fla­tion eases

The Pak Banker - - Front Page -


Rus­sia, the largest emerg­ing econ­omy to raise in­ter­est rates this year, re­frained from in­creas­ing bor­row­ing costs af­ter in­fla­tion un­ex­pect­edly slowed in Oc­to­ber for the first time in six months.

Bank Ros­sii left the re­fi­nanc­ing rate at 8.25 per­cent at a meet­ing in Moscow, half a per­cent­age point above the record low, the reg­u­la­tor said in a state­ment on its web­site to­day. The move was fore­cast by 21 of 23 economists in a Bloomberg sur­vey. Pol­icy mak­ers held their main short-term lend­ing and de­posit rates at 5.5 per­cent and 4.25 per­cent. The de­ci­sion fol­lows a sur­prise in­crease in Septem­ber that pol­icy mak­ers to­day cred­ited for tamp­ing down in­fla­tion ex­pec­ta­tions. The cen­tral bank also cited a sta­bi­liza­tion in food costs that pushed price-growth be­yond this year’s tar­get range. The state­ment’s word­ing sug­gests an end to the “mini- cy­cle” of rate in­creases, ac­cord­ing to Vladimir Koly­chev, chief econ­o­mist at So­ci­ete Gen­erale SA’s OAO Ros­bank (ROSB) unit in Moscow.

“The rhetoric looks to be less hawk­ish as do­mes­tic de­mand con­tin­ued to slow down re­cently, while in­fla­tion showed en­cour­ag­ing signs of sta­bi­liza­tion,” Koly­chev said in an e- mailed re­sponse to ques­tions. While price growth may still reach 7 per­cent in De­cem­ber, the weak­en­ing core in­fla­tion may be a more im­por­tant sign, he said.

The ru­ble weak­ened 0.2 per­cent to 31.5483 per dol­lar as of 12:27 p.m. in Moscow. For­ward rate agree­ments showed the three- month MosPrime rate may fall 7 ba­sis points, or 0.07 per­cent­age point, in the next three months, up from a 2 point fall be­fore the an­nounce­ment, ac­cord­ing to data com­piled by Bloomberg.

Overnight bor­row­ing costs on Rus­sia’s in­ter­bank mar­ket also fell, drop­ping 13 ba­sis points to 5.7150 per­cent, ac­cord­ing to data com­piled by Bloomberg. A close at that level would be the low­est since Oct. 8.

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