Thursday, September 13, 2012

Russia raises interest rate as inflation exceeds target

    The central bank of Russia raised its refinancing rate by 25 basis points to 8.25 percent as high inflation threatens to continue to exceed the bank's target.
    The Bank of Russia said inflation in August and September had continued to rise and it estimated that consumer prices were 6.3 percent higher on September 10 from last year, exceeding its target for 2012. In August the annual inflation rate was 5.9 percent. 
    The bank targets annual inflation of 5-6 percent.  Bank of Russia last changed interest rates in December, when it cut rates by 25 basis points.
   "The observed worsening of the food market conditions in Russia and globally combined with this year’s crop harvest estimates remains the important source of inflation risks, particularly taking into account the impact of the above mentioned factors on inflation expectations," it said in a statement.

    The bank said economic output was close to its potential level though investments in production capacity and retail sales growth decelerated.
   However, it added that producer confidence remained strong along with the labour market and credit growth. This should support "robust domestic demand," the bank said.
     Russia's gross domestic product rose 0.9 percent in the first quarter from the fourth, for an annual rate of 4.0 percent.


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