Slight Easing Move in Russia

September 14, 2011

Bank Rossii cut its minimum one-day repo rate to 5.25% from 5.5% and narrowed the differential between such and the one day overnight deposit rate to 3.0% by also increasing the latter to 3.25% from 3.0%.  The intent of these actions is to lower money market interest rate volatility and to strike a more appropriate balance between upside price risks and downside growth risks according to the central bank statement.  The more meaningful refinancing rate, which was increased from 7.75% to 8.00% in February 2011 and 8.25% in April was left unchanged, as were reserve requirements.  But the directional bias on the refinancing rate appears to have shifted from upward as recently as July to downward now.  In the Great Recession, the refinancing rate was slashed from 13.0% prior to April 2009 to 7.75% in late May 2010.  Growth of 3.4% between 2Q10 and 2Q11 was softer than anticipated, and CPI inflation slowed to 8.0% this month from 9.0% in July.  The next meeting will be held in late October.

Copyright 2011, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.