The Board of Directors’ Decision on the Bank of Russia Interest Rates (Unofficial translation)

The Bank of Russia External and Public Relations Department informs that on 25 November 2011 the Board of Directors of the Bank of Russia decided to keep the refinancing rate and interest rates on the Bank of Russia operations unchanged (table “Interest rates on the Bank of Russia operations”).

The decision was supported by the assessment of inflation risks and risks to the sustainability of economic growth, including those associated with the global economic uncertainty.

By the end of October the disinflationary effect of the decline in food prices had almost faded away and this largely explained the less pronounced slowdown in inflation in October—November. As of 21 November 2011 inflation reached 7.0% over year ago (7.2% in October and September). The rouble appreciation observed in October could contribute to the reduction of the inflation risks caused by its depreciation in August-September. The tightening of monetary conditions resulting from the shortage of the rouble liquidity in the banking sector, which is expected to persist in the medium term, would also help to curb inflation pressure in the future.

The annual growth rate of industrial production continued to decrease in October, and the persistently poor economic confidence indicators reflect the moderate economic growth perspectives. The rate of unemployment increased slightly in October while the pace of growth of real income and wages declined. However, these indicators remained at the levels compatible with the expansion of consumer demand, indicated by the still high retail sales growth rate. The observed firmness of consumption beside the moderate production indicators could result in higher level of economic activity but may also be a source of additional inflation pressure.

Considering recent domestic and international macroeconomic developments the Bank of Russia judged that the current level of money market interest rates was appropriate to balance the inflationary risks and the risks of economic growth slowdown. The increase in money market interest rates, resulting from the transition to the liquidity shortage in the banking sector together with the instability on the global financial markets, puts upward pressure on other interest rates in the economy. Thereupon the Bank of Russia will continue to monitor the money market conditions and the external economic developments, and to assess the risks of further increase in the market interest rates and its consequences.

The next meeting of the Board of Directors on monetary policy issues is planned to be held in the last decade of December 2011.

Interest rates on the Bank of Russia operations

(% p.a.)

¹ 7 days fixed rates REPO operations have been suspended. ² Operations have been suspended.

³ The interest rate has been set from 1 November 2011.

⁴ Operations were suspended from 10 February 2011, resumed from 1 November 2011.

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