Russia: Central Bank tightens the reins, defying market expectations
April 29, 2011
On 29 April, the Central Bank raised the refinancing rate by 25 basis points, from 8.00% to 8.25%, in a move that surprised market analysts. The decision follows on a similar move on 24 February and sets interest rates at their highest level in more than a year. That said, the Central Bank left the reserve requirement ratio on banks' deposits (RRR) unchanged - after raising it in the last three meetings - in a decision which again defied market analysts' expectations. The Central Bank stated that the decision to raise interest rates was taken against a background of inflation expectations exceeding the Central Bank target range of 6.0% - 7.0% for this year. According to the Central Bank, inflationary pressures remain strong despite the waning of the supply-shock effects in the wake of last summer's drought, which destroyed one third of the harvest.
Author: Armando Ciccarelli, Head of Data Solutions