IGNORE- Russia will keep rates low to halt cash inflow

London (Bloomberg) Russia's central bank will continue cutting interest rates as the regulator seeks to stem the inflow of speculative capital, said Bank Rossii First Deputy Chairman Alexei Ulyukayev.

The difference between the bank's policy rate and market rates remains wide enough to attract capital, a trend the central bank wants to curb, Ulyukayev said at a conference in London yesterday.

The bank on November 24 cut the key refinancing rate to a record low 9 per cent in the ninth reduction since it started easing in April as it tries to curb speculative gains in the rouble and ease credit flows. Demand for rouble assets has left Russian stocks overvalued, leading to a threat of overheating, Finance Minister Alexei Kudrin said last month. The bank said in October it will also use interest rates to manage the currency.

The rouble has gained after oil, Russia's key export, surged this year. Urals crude is up about 80 per cent this year, boosting demand for Russian assets.

Oil priced at $70 (Dh257) to $80 a barrel is the "most comfortable level" for Bank Rossii, Ulyukayev said. Capital will continue to flow into the country this month, following inflows of $10 billion in October and "significantly" less in November, he said.

Inflation risks will remain low in the first half of next year, though price gains may start to accelerate in the second half of 2010, according to Ulyukayev.

Bank deposits will grow more than 20 per cent this year, Ulyukayev estimates.