The Central Bank of Russia has opted to leave the key refinancing rate at 8.25% citing the need to balance external uncertainty with moderating inflationary risks.
After raising rates earlier in the year twice, the Central Bank noted that July inflation dropped to 9% annualized from 9.4% in June and added that falling food prices were likely to continue on the back of favourable grain harvest forecasts, saying this is likely to lead to reduced inflationary expectations. But it also noted that growing retail sales were outpacing incomes, with slowing deposit rates adding to evidence of a propensity to spend, which could boost business activity and add to inflationary pressure. It said it was retaining its end of year forecast for 7% inflation.
But the bank also noted a rise in industrial output, with unemployment down due to seasonal factors, to be balanced against a fall in fixed capital investment which the Bank noted reflected fragility in the economic outlook.