Moscow: Russia's central bank cut its main interest rates for the 12th time in less than a year to resuscitate lending and contain the rouble's gains as the economic recovery stutters.
Policymakers lowered the refinancing rate by a quarter of a percentage point to a record low 8.25 per cent and reduced the repurchase rate charged on one- and seven-day central bank loans to 7.25 per cent from 7.5 per cent, effective March 29, Bank Rossii said in a statement yesterday. It last cut rates a quarter-point on February 19.
The bank is lowering borrowing costs as signs appear that a recovery has lost momentum following a record contraction in 2009.
Slower pace
Industrial production expanded at a slower pace in February and bank loans continued to shrink even as lending conditions eased last quarter. Unemployment and slack demand for credit are holding back a rebound, Andrei Kostin, head of VTB Group, Russia's second-largest bank, said on March 2.
"Despite some positive changes in the macroeconomic trends, which show a recovery of economic activity, this process remains insufficiently stable," Bank Rossii said in a statement on its Web site. Lowering rates aims to cut the cost of borrowing, make credit more accessible and "create the conditions for the full recovery of domestic demand".
The bank also said it allowed for the possibility of "increased national currency rate volatility". Cutting interest rates will discourage "short-term capital" inflows and make the domestic currency market more "balanced".
The rouble was little changed against the dollar, gaining less than 0.1 per cent to 29.5245 at 11:33am in Moscow after the decision. Against the euro the Russian currency was 0.2 per cent weaker at 39.4698.
