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Central Bank Of Russia Holds Rate At 8.00%

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The Central Bank of Russia held its benchmark refinancing rate unchanged at 8.00%.  The Bank said: “The dynamics of the main macroeconomic indicators in December showed persistent firmness of consumption beside the moderate production growth figures. Further decrease in unemployment rate, high real income growth rate and the continued expansion in consumer credit contributed to the acceleration of retail sales growth. The growth rate of investment in production capacity increased in December. However, industrial production growth rate in year-over-year terms decreased sharply compared to November, which was partly explained by the decline in particular components of the index due to weather-related factors. Production growth rates and economic confidence indicators remained rather low in the recent months.”

The Russian central bank previously cut the refi rate 25bps at its December meeting, while it last raised the fixed overnight deposit rate by 25bps to 3.50% in May, and the benchmark refinancing rate by 25 basis points to 8.25% in April this year.  Russia reported annual inflation of 4.1% in January, down from 6.8% in November, 7.2% in September and October, down from 8.2% in August, 9% in July, and 9.4% in June, meanwhile Bank Chairman Sergey Ignatiev is trying to keep inflation between 6% and 7%.  

Russian economic growth was recorded at 5.2% y/y in Q3 this year, compared to 3.4% in Q2, 4.1% in Q1, and 4.5% in the December quarter of 2010; the IMF is expecting 4.5% growth for the full year.  The Russian Ruble (RUB) has weakened about 3% against the US dollar over the past year, while the USDRUB exchange rate last traded around 30.16.  The Bank plans to meet again in early March.

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