Russian central bank cuts key rate

MOSCOW - Agence France - Presse

The Russian central bank’s rate cut was sparked in part by concerns that threats of a liquidity crisis were becoming more evident, analysts say. REUTERS photo

Russia’s central bank cut its main refinancing rate for the first time since June 2010 on Friday citing uncertainties about global economic growth.

The bank said its cut of 0.25 percentage point to 8 percent was “based on the assessment of inflationary risks and risks to stable economic growth, including those caused by uncertainty over the foreign economic situation.”

It marks the first time that rates have come down in Russia since June 1, 2010. The move underscores concerns over how Europe’s sovereign debt problems may affect the domestic economy.

Russia raised rates for the first time since the 2008 global financial crisis in May 2011 when inflationary pressures began to threaten a fragile recovery. But officials have since voiced much greater concern about European contagion spreading to Russia while inflation has been tempered by modest growth of around 4 percent.

Depression could last long

President Dmitry Medvedev warned on Thursday that a “global economic depression could last several years” and called for new efforts to step up competitiveness.

The central bank statement Friday said that it had a strong handle on inflation and did not expect price pressures to emerge in the economy until the middle of 2012 at the earliest. It reported an annual inflation rate of 6.4 percent for this month compared to 6.8 percent in November - both figures well within government forecasts.

Analysts said the interest rate cut was sparked in part by concerns that threats of a banking liquidity crisis were becoming more evident.