The Board of Directors’ Decision on the Bank of Russia Interest Rates (Unofficial translation)

The Bank of Russia External and Public Relations Department informs that on 28 October 2011 the Board of Directors of the Bank of Russia decided to keep the refinancing rate and interest rates on the Bank of Russia operations unchanged (table “Interest rates on the Bank of Russia operations”).

The decision was supported by the assessment of inflation risks and risks to the sustainability of economic growth, including those associated with the uncertainty of the outlook for global economic activity.

Since the previous meeting the Board of Directors on monetary policy issues the pace of inflation continued to decrease and as of 24 October 2011 reached 6.9% over year ago (7.2% in September, 8.2% in August). The disinflation was still largely driven by prices on certain categories of food products, however this effect has been losing momentum. In September disinflation was also registered in the services prices. Meanwhile the annual rate of non-food price inflation in recent months remained elevated. The Bank of Russia will continue to monitor the influence of relevant factors on the inflation dynamics, including the potential pass-through effect of rouble depreciation of the recent months on consumer prices.

The dynamics of the main macroeconomic indicators in September were mixed. In September industrial production annual growth rate decreased sharply relative to the August level. Meanwhile after previous month’s decline fixed capital investment annual growth rate picked up. Persistently modest unemployment rate as well as faster growth in real disposable incomes and consumer credit supported consumer demand growth which was reflected in the continuing acceleration of retail sales growth rate. Current developments in domestic demand indicators could result in higher level of economic activity but may also be a source of additional inflation pressure.

The situation on the money market in recent months has been characterized by the growing banking sector demand on the Bank of Russia’s refinancing instruments. Increase in the amounts of liquidity provided by the Bank of Russia will contribute to restrain money market interest rates growth.

Considering recent domestic and international macroeconomic developments and the effect of the monetary policy measures, implemented in recent months, the Bank of Russia judged that the current level of money market interest rates is appropriate to balance the inflationary risks and the risks of economic growth slowdown in the nearest future.

The Bank of Russia also decided to expand the maturity of the Bank of Russia’s loans secured by gold to 180 days and set the interest rate on such loans with maturity from 91 to 180 days at 7.25% per annum.

The next meeting of the Board of Directors on monetary policy issues is planned to be held in the last decade of November 2011.

Interest rates on the Bank of Russia operations
(% p.a.)

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