Related News:
Russia Leaves Benchmark Interest Rates Unchanged as Economy Gathers Pace
Russia’s central bank left its main interest rates unchanged for a second month as an economic recovery in the world’s biggest energy exporter gathers speed and after inflation slowed.
Bank Rossii kept the refinancing rate at a record low 7.75 percent, it said on its website today, as forecast by all 21 economists in a Bloomberg survey. It also left the repurchase rate charged on one- and seven-day loans unchanged at 6.75 percent. The regulator last trimmed rates on May 31.
“Positive trends were seen in macroeconomic indicators,” the bank said in a statement. “Significant signs of recovering economic activity are the continued dynamic growth of capital investment and retail sales, as well as a further growth of credit volume in the banking sector.” If these trends stay unchanged, the current level of rates will be acceptable for “the coming months.”
The Economy Ministry will raise its forecast for growth this year from 4 percent after household demand boosted output last quarter, Deputy Economy Minister Andrei Klepach said on July 27. Gross domestic product rose an annual 5.4 percent in the three months through June, he said. GDP advanced 2.9 percent in the first quarter, the statistics office says.
Fairly Fragile
“Economic growth continues but it hasn’t become investment-oriented to the necessary extent,” Klepach said. “The sub-components of growth remain fairly fragile with the exception of consumer demand.”
Russia will experience “moderate” growth from 2011 to 2013 and won’t reach pre-crisis levels of GDP until the fourth quarter of 2012, Finance Minister Alexei Kudrin said on July 28. “We’ll just be emerging from the crisis.”
The 30-stock Micex Index extended losses after the decision. The gauge was down 0.8 percent at 1,406.69 as of 11:37 a.m. in Moscow. The ruble weakened and was down 0.2 percent at 30.2231 versus the dollar.
Annual inflation slowed to 5.8 percent last month from 6 percent in May, according to the Federal Statistics Service. The average rate banks charge on ruble-denominated loans to companies reached 11.5 percent in June, compared with 11.4 percent the previous month, according to central bank data.
“A still sizable output gap will likely keep core inflation pressures subdued, allowing the central bank to maintain the current level of interest rates for the rest of the year,” Anna Zadornova, a London-based economist at Goldman Sachs, said by e-mail today.
Reached Bottom
Still, inflation has probably “reached a bottom” this month and “adverse weather conditions increased the risk of an upside surprise in food prices in the near term,” she said.
While the bank will continue to intervene on currency markets to “smooth out the volatility” of the ruble, “we will not set a target for the ruble’s nominal or real exchange rate,” Bank Rossii First Deputy Chairman Alexei Ulyukayev said on June 29.
The ruble may strengthen to 28 versus the dollar by the end of 2012 and maintain a “trend toward appreciation” in the next three years, according to a government report last month. The ruble may gain 20 percent in the next three years against the currencies of Russia’s major trading partners with the effects of inflation stripped out, the report said.
Bank Lending
Russian bank lending expanded in June by the most this year, Bank Rossii said in a statement on its website today.
Corporate loans grew 2.1 compared with 1.9 percent in May, it said. Retail lending expanded 1.6 percent from 1.2 percent in the previous month. Deposits increased 3.2 percent versus 1.7 percent, according to the statement.
The government’s “key goal” remains gradually moving towards balancing the budget, Prime Minister Vladimir Putin said on July 28. The deficit will narrow to 3.6 percent of GDP next year, 3.1 percent in 2012, and 2.9 percent in 2013, according to Kudrin. The deficit may narrow to 5 percent of gross domestic product or less this year from 5.9 percent in 2009, the first shortfall in a decade, Putin said.
The budget plan for 2011 is set to “create an environment for further disinflation should the central bank maintain a weighted monetary policy, moderating its intervention on the foreign exchange market and thus, its printing of money,” Evgeny Gavrilenkov and Anton Stroutchenevski, economists at Troika Dialog in Moscow, said in a research note today.
BRIC Policies
Of the other so-called BRIC countries, Brazil’s central bank on April 28 became the first in Latin America to increase borrowing costs in more than a year, raising the Selic rate to 9.5 percent from 8.75 percent. India raised its benchmark rates this month and both China and India have increased reserve requirements for banks to avoid stoking unsustainable lending.
Russia suffered a deeper recession than Brazil last year. That compares with China’s growth of about 9 percent and India’s 7.2 percent.
Russia must gradually withdraw its anti-crisis measures to prevent “bubbles” from forming in the economy, Putin said at a meeting in the Moscow region last month.
To contact the reporter on this story: Maria Levitov in Moscow at mlevitov@bloomberg.net
Rate These Stories
Rate this Page