Russia's central bank on Wednesday decided to leave its key refinancing rate unchanged as expected by economists. But the bank unexpectedly lowered its repurchase rate by a quarter point and lifted the deposit rate by a similar 25 basis points.

Bank Rossii left its refinancing rate unchanged at 8.25 percent. In order to reduce the volatility in the money market, the central bank cut the repurchase rate to 5.25 percent and raised the overnight deposit rate to 3.75 percent, effective from September 15.

The central bank said in a statement that the decision was based on an assessment of inflation risks and risks to the sustainability of economic growth. Driven by food products prices, the downward trend in annual inflation continued in September, the bank noted.

Further, the central bank judged that the current borrowing cost is appropriate to balance the inflationary risks and risks to economic slowdown in the near term.

Neil Shearing, an economist at Capital Economics said that the latest move may be a sign that policymakers are preparing themselves for a slowdown on the global economy.

The economist expects growth fears to overtake inflation concerns next year, as the G7 flirts with recession and the oil price slides further. This could in turn limit further hikes in the deposit rate, while further cuts in the repo rate as well as reserve requirements may be on the cards, Shearing added.

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