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Russian Central Bank brings down refinancing rate to 8%

December 23, 2011, 12:24 UTC+3

The Central Bank of Russia decided to bring down the refinancing rate by 0.25% to 8% of annual interest rate starting from December 26

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MOSCOW, December 23 (Itar-Tass) —— The Central Bank of Russia decided to bring down the refinancing rate by 0.25% to 8% of annual interest rate starting from December 26, the Central Bank said in a statement with the reference to the decision of the board of directors on Friday.

Meanwhile, the Central Bank of Russia brings down the interest rates on some transactions to provide the liquidity on fixed terms and increases by 0.25% the interest rates on deposit transactions on fixed terms.

“This decision was taken with due account of the assessment of inflation risks and risks for the sustainability of economic growth, including those caused by some uncertainty persisting in the development of foreign economic situation,” the CBR said in the statement. “The decision to make the interest rates closer on some transactions to provide and absorb the liquidity of the CBR is neutral in terms of the guidelines of the current monetary policy,” the statement runs. “This decision should contribute to curbing the volatility of the interest rates on the monetary market and a stronger efficiency of the percentage channel of the transmission mechanism of the monetary policy in terms of attaining the final goal for the inflation rate,” the banking regulator said.

The CBR believes that the annual growth rate of consumer prices retained a downward tendency for the past month and made 6.4% on December 19 (6.8% in November). “Since the growth in the regulated prices and tariffs was scheduled to be postponed until the middle of 2012 the Central Bank of Russia expects a substantial decline in the annual inflation rate at the beginning of next year, but the decision-making in the monetary policy will take into account a temporary nature of this effect and will take medium-term inflation forecasts as a guideline,” the CBR believes. “Meanwhile, a tougher monetary policy since last September due to the transition to the liquidity deficit in the banking sector will contribute to the attainment of the inflation target rate upon the results of next year,” the CBR pointed out.

The dynamics of main macroeconomic indicators in November 2011 points to stable consumption indicators persisting amid a moderate growth of the indicators in the production sector. The industrial production growth rate is keeping at a quite low level and the growth of investments in the charter capital slowed down somehow. Meanwhile, the unemployment rate is reported on the decline, the real salary growth rate and the retail trade growth rate remain high.

With due account of current domestic and foreign macroeconomic tendencies the CBR takes the level of interest rates on the monetary market inside the percentage corridor as acceptable to keep the balance between inflation risks and the risks for a slower economic growth. The CBR continues the monitoring of the monetary market and the development of the foreign economic situation, as well as the assessment of risks and aftermaths for growing interest rates on the monetary market.

The CBR Board of Directors is expected to have its next meeting in the first decade of February 2012 to consider the issues of the monetary policy.

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