MOSCOW, December 10 (RIA Novosti) – Russia’s central bank has kept its key refinancing rate unchanged at 8.25 percent amid signs of slowing consumer price inflation and subdued economic activity, the regulator said on Monday.
In a surprise move, however, the regulator has decided to raise its fixed-term deposit rate by 0.25 percentage points and simultaneously reduce the ruble swap rate by the same amount to narrow the interest rate band and reduce rate volatility while keeping other rates unchanged.
The decision was made following an assessment of inflation risks and the prospects of economic growth, the regulator said in a statement.
“The decision to narrow the interest rate band on some of the Bank of Russia’s liquidity provision and absorption operations is neutral from the viewpoint of the monetary policy focus. It should contribute to restricting interest rate volatility on the money market and strengthen the effect of the interest rate channel of the monetary policy transmission mechanism,” the bank said.
Most analysts polled by Prime news agency did not expect the regulator to change rates in December, pointing to slower inflation and weak economic growth.
“The Bank of Russia will continue monitoring inflation risks, including world food price dynamics, foreign market developments and the consequences of tighter monetary conditions for the Russian economy. In its decisions, the Bank of Russia will be focused on medium-term inflation targets and economic growth prospects, and also the dynamics of inflationary expectations,” the bank said.
Russia’s consumer price growth slowed to 0.3 percent in November from 0.5 percent in October and 0.6 percent in September. Russia’s annual inflation was unchanged in November from October and stood at 6.5 percent compared to 6.6 percent in September, according to data from the Federal State Statistics Service Rosstat.
At the same time, annual inflation exceeded the government’s original forecast of 6.1 percent in 2012. After a consumer price leap in September, the Central Bank raised its 2012 inflation forecast to 6.5-6.7 percent while the inflation target for 2013 was set at 5-6 percent.
The Russian government has been struggling for years to achieve low-digit inflation, in order to create a favorable investment climate and lure foreign investment.
Consumer price inflation in Russia hit a historic post-Soviet period low of 6.1 percent in 2011.