The Bank of Russia Once Again Has Raised Interest Rates

February 9 saw the Bank of Russia continue its policy (see the comment of Feb 1, 2009) aimed at increasing costs of available for commercial banks resources, which allows a lower pressure on the Ruble.

Specifically, fixed interest rates by collateral loans, loans against assets and direct REPO transactions increased at 1 p.p. on average. Minimal interest rates at the direct REPO auctions and those on allocation of collateral loans were likewise raised at 1 p.p. Plus, the CBR increased interest rates by deposit operations at a comparable value.

So, the CBR has once again demonstrated its eagerness to increase costs of resources for commercial banks. Given that the CBR’s funds play an increasingly growing part in Russian credit institutions’ liabilities, this policy may indeed lower the attractiveness of purchases of forex against the background of the CBR leadership asserting that a drastic contraction in imports between late-2008- early 2009 allowed a balanced current account of the balance of payments. We believe that providing oil prices stay at the current level and no sweeping capital flight occur, the monetary and credit regulators should succeed with maintaining the exchange rate of the national currency within the set limits.

P. Trounin, Head, Department of Monetary and Credit Policy