Central Bank of Russia

December 10, 2012

Bank Rosii reduced the width of its interest rate band by increasing the overnight deposit rate by 25 basis points to 4.5% and cutting the foreign currency swap rate by a similar amount to 6.5%.  The main central bank rate, the 8.25% refinancing rate, was left unchanged.  It’s increase of 25 basis points in mid-September was the only modification of 2012 and offset a 25-basis point cut in December 2011.  Two 25-bp increases of the refinancing rate wee administered previously in February 2011 and April 2011.  Russian CPI inflation of 5.8% in November lies above the 5-6% target range but has stopped increasing.  GDP expanded 2.9% between 3Q11 and 3Q12, and the 57.1 reading on Russia’s service sector purchasing managers index was the second best since May 2011.  But narrowing the swap rate-deposit rate differential, monetary authorities hope to restrain money market volatility in the future.  This month’s decisions did not change the underlying policy stance, which is reflected in the refinancing rate.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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