The refinancing rate, which is seen as a ceiling for borrowing money and a benchmark for calculating tax payments, will rise to a 1 1/2 year high of 11 percent beginning July 14. The minimum rate for taking out one-day loans from the central bank in repurchase auctions was increased to 7 percent, according to a statement on Bank Rossii's Website.
The bank raised borrowing costs in February, April and June to control price growth after inflation accelerated to a 5 1/2 year high of 15.1 percent in June, fueled by oil and gas prices and capital inflows during a decade of economic growth. The government's 10.5 percent target will be ``very difficult'' to meet, Finance Minister Alexei Kudrin said in June, and the Economy Ministry plans to raise its forecast, Interfax reported yesterday.
Banks including Merrill Lynch & Co. and Goldman Sachs Group Inc. predict spiraling inflation will force Bank Rossii to let the ruble appreciate by as much as 5 percent in the next 12 months to reduce prices on imported goods. The bank limits the currency's movements by buying and selling rubles daily to protect the competitiveness of Russian exporters.
Every 1 percentage-point increase in the ruble against its dollar-euro currency basket reduces the inflation rate by 0.3 percentage point, according to Bank Rossii. Policy makers allowed the ruble to appreciate by about 1.3 percent last year as consumer prices quickened to 11.9 percent.