Russia's central bank kept its benchmark refinancing rate steady at 8.25 percent, as expected, but narrowed its interest rate corridor by raising the fixed-term deposit rate and cutting the swap rate, saying this was neutral in terms of monetary policy but should reduce volatility in the money market and strengthen the effect of monetary policy on the interest rate channel.
The Bank of Russia, which raised its refinancing rate by 25 basis points in September to combat inflation, raised the fixed term deposit rate by 25 basis points to 4.50 and cut the rate on the daily ruble currency swaps by the same amount to 6.50 percent.
The central bank said inflation had stabilized in November but remained above the bank's target and this could affect expectations and remains a source of inflationary risk.
"On the other hand, the increase in the Bank of Russia's monetary interest rate in September 2012 had to some extent anchored inflation expectations and there is no significant pressure on inflation from the demand side," the central bank said in a statement after a meeting of its board of directors.
Russia's headline inflation rate was steady at 6.5 percent in November from October and core inflation remained at 5.8 percent, with the rise in prices of industrial goods slowing, the bank said.
The Russian central bank targets annual inflation of 5-6 percent.
Russia's Gross Domestic Product expanded by 0.6 percent in the third quarter from the second for annual growth of 2.9 percent, down from 4 percent, "reflecting a cooling of economic activity" and indicators point to a continuation of the trend.
But sentiment indicators and the labor market remain positive, which should support demand. Aggregate output remains close to its potential level.
"Given the current domestic and external macroeconomic trends, the emerging level of money market rates is regarded as acceptable for the near future," the bank said.