Russia raises interest rates across board
Source: Agencies |
February 26, 2011, Saturday
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Print Edition
Print Edition
THE Russian central bank surprised markets yesterday by using its full range of weapons to tighten monetary policy, sending a strong signal that it views rising prices as a greater threat than slow economic growth.
It raised all of its key interest rates by 25 basis points - in contrast to analysts' expectations of a rise only in deposit rates - and increased minimum reserve requirements for the second month running.
The rise in reserve requirements for foreign liabilities, however, was double that on domestic ones - something which should discourage inflows of speculative capital and a sign of the bank's concern that a stronger rouble would hurt growth.
"The decision ... was taken due to continued high inflation expectations and ... grounds for capital inflow into Russia against the backdrop of high global oil prices," the central bank said in a statement.
The rouble scored fresh 10-month highs against the dollar on the news, which came a day after hawkish Finance Minister Alexei Kudrin said it was time to raise rates to tame high inflation.
Analysts had expected the rate decision to be a tough one, with the regulator -juggling soaring prices on the one hand and the economy's dismal performance so far this year on the other, but most had -envisaged a softer approach from the bank.
"With such a move the central bank clearly signals their concern over inflation - and determination to move toward inflation targeting," Aurelija Augulyte, an emerging market analyst with Nordea Markets, said in a research note.
The central bank raised the overnight deposit rate to 3 percent, as expected, and the refinancing rate to 8 percent.
Requirements for liabilities to non-residents were raised by 100 basis points to 4.5 percent, and for other -liabilities by 50 basis points to 3.5 percent.
The worst drought in more than a century killed a third of Russia's harvest last year, pushing up the cost of food and driving a surge in headline inflation.
It raised all of its key interest rates by 25 basis points - in contrast to analysts' expectations of a rise only in deposit rates - and increased minimum reserve requirements for the second month running.
The rise in reserve requirements for foreign liabilities, however, was double that on domestic ones - something which should discourage inflows of speculative capital and a sign of the bank's concern that a stronger rouble would hurt growth.
"The decision ... was taken due to continued high inflation expectations and ... grounds for capital inflow into Russia against the backdrop of high global oil prices," the central bank said in a statement.
The rouble scored fresh 10-month highs against the dollar on the news, which came a day after hawkish Finance Minister Alexei Kudrin said it was time to raise rates to tame high inflation.
Analysts had expected the rate decision to be a tough one, with the regulator -juggling soaring prices on the one hand and the economy's dismal performance so far this year on the other, but most had -envisaged a softer approach from the bank.
"With such a move the central bank clearly signals their concern over inflation - and determination to move toward inflation targeting," Aurelija Augulyte, an emerging market analyst with Nordea Markets, said in a research note.
The central bank raised the overnight deposit rate to 3 percent, as expected, and the refinancing rate to 8 percent.
Requirements for liabilities to non-residents were raised by 100 basis points to 4.5 percent, and for other -liabilities by 50 basis points to 3.5 percent.
The worst drought in more than a century killed a third of Russia's harvest last year, pushing up the cost of food and driving a surge in headline inflation.
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