Russian Central Bank to Weigh Higher Rates on Inflation

Russia’s central bank, grappling with the fastest price growth in three years, may “seriously” weigh raising borrowing costs if inflation expectations remain high, according to First Deputy Chairman Sergei Shvetsov.

“With the scenario unfolding now, the Bank of Russia will be forced to seriously consider raising interest rates further,” Shvetsov said today at a conference in London.

The stance runs counter to predictions by economists from banks including ING Groep NV and JPMorgan Chase & Co. that the Russian central bank will be wary of raising rates at its Oct. 31 meeting. Policy makers increased their key interest rate by 250 basis points since February to 8 percent, looking past the slowest economic growth in four years to combat capital outflows and market turmoil as the crisis flared in Ukraine.

Consumer prices jumped 8 percent from a year earlier in September after the Ukrainian conflict triggered a ruble selloff, the U.S. and the European Union imposed sanctions and President Vladimir Putin retaliated with a ban on a range of food imports.

Inflation expectations rose last month, the central bank said Oct. 10, adding that it saw a “significant” increase in the number of people who noticed faster price growth in the past year. Inflation has now reached 8.3 percent on an annual basis, Interfax reported today, citing central bank First Deputy Governor Ksenia Yudaeva.

Policy makers were targeting price growth at 5 percent this year after missing their goal of 5 percent to 6 percent in 2013.

The three-month MosPrime rate, which large Moscow banks say they charge one another, may rise 156 basis points, or 1.56 percentage points, in the next three months, according to forward-rate agreements tracked by Bloomberg. That compares with 2 percentage points of increases seen on Oct. 13.

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