CBR not ruling out new rates hike, inflationary risks outweigh risk of slowdown
MOSCOW. Oct 2 (Interfax) - The Central Bank of Russia, which unexpectedly put its refinancing rate and other key rates up a quarter-percent in the middle of September, still thinks inflationary risks outweigh the risks of economic slowdown.
"We think the inflationary risks are higher," CBR First Deputy Chairman Alexei Ulyukayev told the press on the sidelines of the Russia Calling! investment forum on Tuesday.
The CBR said when it put its refinancing rate up to 8.25% in September - the rate's first increase since May last year and the first time the rate has been altered at all since December - that the decision was made "in view of prices and growth in inflationary expectations, which increases the risks of exceeding the medium-term inflation targets of the Bank of Russia, and also taking into account the economic growth prospects."
"In August and in the beginning of September inflation continued to increase and as of September 10 the pace of inflation was estimated at 6.3% over a year ago, which exceeds the target range for 2012. The higher pace of inflation was mainly attributed to the accelerated growth of the food prices and the further increase in regulated prices and tariffs. The observed worsening of the food market conditions in Russia and globally combined with this year's crop harvest estimates remains the important source of inflation risks, particularly taking into account the impact of the above mentioned factors on inflation expectations," the CBR said in its commentary to the decision.
Analysts said they thought rates could go up another 0.25-0.5 pp by the end of the year, and the CBR's Ulyukayev hinted they might be right.
"We're not ruling out either keeping rates on hold or raising them," he said on October 2.