🔺 What to do when markets are at an all-time high? Find smart bargains, like these.See Undervalued Stocks

UPDATE 1-Russia cbank raises reserve requirements, holds rates

Published 03/25/2011, 05:48 AM
Updated 03/25/2011, 05:52 AM

* Central bank leaves key interest rate on hold

* Raises reserve requirements by 50-100 basis points

* Says inflation expectations, risks to growth remain

(Adds detail, background, quote)

MOSCOW, March 25 (Reuters) - Russia's central bank on Friday raised its minimum reserve requirement but unexpectedly left key interest rates unchanged, as it looks to steer a course between high inflation expectations and risks to economic growth.

The central bank left the overnight deposit rate -- seen as its most effective tool in reducing rouble liquidity -- unchanged at 3.00 percent.

Most economists had expected a 25 basis-point hike.

It increased minimum reserve requirements by 100 basis points for liabilities for non-residents, and by 50 basis points on all other liabilities.

"The central bank has surprised again. It is unlikely that reserve requirements can be considered as a factor that can stabilise inflationary risks," said Dmitry Polevoy at ING.

"Apparently, the central bank has decided to take a waiting stance to see what will happen with inflation and macroeconomic data in coming weeks," he added.

The central bank said in a statement: "The decision has been made because of the continued expectations of high inflation and risks to the economic growth."

It added that the instability on global financial and commodity markets may have an impact on the Russian economy.

"The trend of macroeconomic indicators is ambiguous and they have started to think that there are risks to the economy," said Alexander Morozov, chief Russia economist at HSBC.

"By not raising rates, the central bank is taking a risk, because inflation risks -- as they note themselves -- remain, while given high oil prices there is a high chance that economic growth will speed up in the near future."

The pace of inflation eased in the latest week, but consumer prices have risen 3.6 percent since the start of the year, making the official 2011 target of 6-7 percent inflation tough to achieve.

Friday's decision follows February's more aggressive monetary tightening, when the central bank decided to raise key interest rates as well as increasing reserves requirements.

Most analysts polled by Reuters had expected that this time, the central bank would kept the benchmark refinancing rate on hold but would raise deposit rates as well hiking reserve requirements. (Writing by Lidia Kelly; Editing by Hugh Lawson)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.