Central bank cuts lending rates amid rouble optimism

Oct 14th, 2009 | By | Category: Central Bank

Russia's central bank hopes to limit rouble appreciation after buying more than a billion dollars, healing in the same week as lending rates were cut for the seventh time since April.

Analysts claim the drop by 50 basis points to 10 per cent illustrates that the country is more concerned with economic growth than inflation, with "sluggish credit growth" identified as a threat to Russia's recovery.

In a statement reported by Reuters, the bank said rate cuts were necessary since industrial output dropped month-on-month in August – the first such fall in three months.

"Although previous central bank refinancing rate cuts have resulted in lower interbank lending rates, lending rates to the real sector of the economy remain relatively high," the statement continued.

"Total credit to the real economy in September has practically not changed."

Alexei Ulyukayev, the central bank's first deputy chairman, told a VTB Capital conference that easing inflationary pressures had enabled the institution to proceed with the cut.

He further suggested that successful control of inflation might facilitate a free float of the rouble by the end of 2012.

Further interest rate cuts in 2009 have not been ruled out by the central bank.

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