30 Jun 2010 12:04

Central Bank decides to leave interest rates unchanged

MOSCOW. June 30 (Interfax) - The board of directors of the Central Bank of Russia has decided to leave the refinancing rate and other interest rates unchanged, the Central Bank's press center reported on Wednesday.

The decision was made taking into account the overall trends in economic activity and the current monetary and lending situation, it said.

The Central Bank said in commentary that inflationary pressure remains moderate: inflation in April-June is measured at 6% annually. Although inflation is slowing at a lower pace, the Central Bank does not believe the inflationary risks are sufficient to justify any fiscal tightening.

Industrial activity, employment and consumer demand continue to recover. Industrial output increased in May, led by the processing industries, and growth in fixed capital investment accelerated, as did retail trade. The trend was also favorable on the labor market, with unemployment shrinking in May while real wages continued to rise.

Bank lending to the economy has been increasing since March and the interest rates on loans to the real sector are declining. Further expansion of lending will continue thanks to fiscal easing and due to the improving credit risk picture and stabilizing market expectations.

The current parameters of Central Bank interest rate policy provide for a balance between access to borrowing and inflation risks and are neutral from the standpoint of cross-border capital flows. The Central Bank expects the current interest rate levels to persist in coming months.

The Central Bank's board will next meet to discuss interest rate policy in July 2010.

The Central Bank made 14 quarter-point interest rate cuts beginning in 2009, the last one coming on June 1, 2010, which reduced the refinancing rate to 7.75%.