No Change in Russia’s 7.75% Refinancing Rate

September 29, 2010

The Bank of Russia left its benchmark rate unchanged in spite of an acceleration of inflation to a 12-month pace of 6.7% in September from 6.1% in August, further ruble depreciation and some evidence of a rise in inflation expectations.  The bank’s decision was anticipated by analysts.  Policy continues to be oriented toward the promotion of economic growth.  From a high of 13.0% from December 2008 until April 2009, the key interest rates was lowered 14 times, the last cut being made at the end of this past May to 7.75% from 8.0%.  In Pakistan, floods have lifted food costs (see prior update in this section); a drought in Russia has had the same directional impact on that country’s food price index and overall inflation.  Russian GDP was 4.5% higher at mid-year than mid-2009, but officials find the state of domestic demand hesitant and are concerned about enhanced global uncertainties.

Copyright Larry Greenberg 2010.  All rights reserved.  No secondary distribution without express permission.

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