(Updates with central bank comment from fourth paragraph.)
Nov. 25 (Bloomberg) -- Russia left borrowing costs unchanged for a second month after central bank Chairman Sergey Ignatiev said inflation may breach his target for the year.
Bank Rossii held the refinancing rate at 8.25 percent after two increases this year, Moscow-based Bank Rossii said in a statement on its website today. The overnight auction-based repurchase rate used to provide banks with cash stayed at 5.25 percent, while the overnight deposit rate, used to withdraw liquidity, was kept at 3.75 percent. The decision was in line with economist forecasts.
The world’s largest energy exporter is trying to cap inflation at 7 percent, which would be the lowest year-end level since the Soviet Union collapsed in 1991. The ruble’s depreciation since August may fan price growth next month as commodity exports power economic growth above 4 percent, which “isn’t bad,” Ignatiev said last week.
“Based on current domestic and foreign macroeconomic trends, the existing level of money-market interest rates is seen by Bank Rossii as adequate for ensuring the balance between inflationary risks and risks of slower economic growth,” the regulator said, repeating the wording used in its Oct. 28 statement.
The ruble kept declines against the dollar, depreciating 0.3 percent to 31.5673 at 11:04 a.m in Moscow, heading for its weakest closing level since Oct. 7. Stocks erased declines with the Micex Index adding 0.2 percent to 1,395.73 after an earlier drop of as much as 1 percent.
Inflation was 7 percent on Nov. 21 from a year earlier, compared with 7.2 percent in October, according to the statement.
A cash shortage in the banking system and the instability on global financial markets are driving up money-market rates, which is pressuring borrowing costs across the economy, Bank Rossii said.
--With assistance from Alena Chechel, Zoya Shilova and Denis Maternovsky in Moscow. Editors: Paul Abelsky, Brad Cook
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