Russia refrains from rate increase as inflation eases
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.