The Russian central bank decided to hold its interest rates steady on Wednesday, coming in line with market expectations and following suit with its westerly neighbors in Europe who held rates steady last week; though one adjustment does have some analysts abuzz. The bank decided to cut its repurchasing rate (also known as the repo rate) by 25 basis points while lifting its deposit rate by the same amount.
The repo rate will be slashed from 5.50% to 5.25% effective 15 September 2011, while the deposit rate will be bumped up to 3.75% from 3.50%. The Russian refinancing rate was left unchanged at 8.25%
The reasoning behind the move, according to the bank's official statement, was to position the nation's currency against unwanted volatility should a liquidity crisis take place. Narrowing the rate differential is expected to smooth the value changes in the Russian ruble (RUS) over time; giving investors more confidence against heavy losses should they decide to take on more RUS in their portfolios. These new rate levels are expected to act as a balance to various growth risks which have cropped up lately, and to the slowing speed of inflation.
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