Russia holds rates as inflation reaches 2012 peak
2012-07-13 16:51:03
Russia refrained from cutting interest rates for a seventh month as faster inflation since May keeps policy makers from joining emerging-market peers in easing borrowing costs.
Bank Rossii kept the refinancing rate at 8 percent, a quarter-point above the record low, policy makers said in a statement after meeting today. That was in line with 14 of 15 forecasts in a Bloomberg survey. The regulator also held the auction-based repurchase rate, the main tool for providing rubles to lenders, at 5.25 percent and the overnight deposit rate at 4 percent.
Central bank Chairman Sergey Ignatiev has set out to cap inflation at 6 percent this year after delivering record-low price growth in 2011, resisting a push around the globe to ease policy in response to Europe’s debt crisis. Russia is the last major emerging market to leave rates unchanged this year as Brazil, India, South Korea and China have all cut rates to ease credit flows and spur growth.
“Given the current domestic and external macroeconomic trends, the present level of money-market rates is seen as appropriate for the nearest future,” policy makers said in the statement. The bank said in last month’s statement that the rates were acceptable for the “coming months.”
The ruble and the Micex stock index retained earlier gains after the announcement. The Russian currency strengthened less than 0.1 percent to 32.7545 per dollar as of 3:56 p.m. in Moscow, while the Micex rose 0.9 percent to 1,406.53.
Inflation Quickens
Inflation was 5 percent as of July 9 compared with a year earlier, the fastest pace since December, Bank Rossii said in the statement. Consumer prices rose 4.3 percent from a year earlier in June, up from a record-low 3.6 percent the previous month after a drop in the ruble stoked costs for imported food.
July inflation has already reached 0.8 percent as of July 9 and may keep rising at 0.3 percent a week as a drought in the U.S. drives up global wheat prices, Natalia Orlova and Dmitry Dolgin, analysts at Alfa Bank in Moscow, said yesterday in a research note.
“To stay within the 6 percent full-year 2012 target recently reiterated by the central bank, inflation would need to be zero in the coming two months and grow by a very modest 0.4 percent per month in the fourth quarter,” they wrote.
Growth in Russia, the world’s ninth-largest economy, slowed in the second quarter to about 3.9 percent or 4 percent, Economy Minister Andrei Belousov said late yesterday in Yalta, Ukraine. Still, the government may raise its 2012 growth forecast to as much as 4 percent from 3.4 percent now as investment and retail sales grew more than forecast, he said last month.
China, Brazil
Monetary-policy makers in China, Russia’s largest trading partner, have cut rates twice since the start of June to reverse a slowdown in growth. The Bank of Korea unexpectedly cut borrowing costs for the first time in more than three years today, after Brazil reduced its benchmark rate for an eighth straight time.
Bank Rossii will cut the refinancing rate by a quarter- point by the end of the first quarter of next year, according to the median estimate of seven economists in a Bloomberg survey.
The acceleration in inflation since June is a result of a planned increase in utility costs and higher food prices, Evgeny Gavrilenkov, chief economist at Troika Dialog in Moscow, said in a telephone interview before the meeting.
“There was a rise in produce prices, meaning things that aren’t yet ripe in Russia had to be imported,” Gavrilenkov said. “There isn’t any fundamental inflationary pressure in the economy.”