Russia's central bank raises its key interest rate

Russia's central bank raises its key interest rate

PanARMENIAN.Net - Russia's central bank has raised its key interest rate by one percentage point to 10.5% as it steps up the fight to tackle inflation. It comes just six weeks after it raised the rate to 9.5% from 8%, BBC News reports.

The bank's official website added that it will continue raising the rate "in case of further aggravation of inflation risks".

In its monthly economic update the Bank of Russia also said that, as of Dec 8, annual inflation was 9.4%.

A weak ruble and a ban on western food imports has kept inflation high.

The ruble hit new lows after the rates decision, and was trading at 55.45 against the dollar and 68.98 against the euro not long after the bank's announcement.

The rate hike comes a day after the bank admitted it had intervened to support the ruble in foreign currency markets last week, spending a total of $4.53bn. It has spent more than $70bn supporting the ruble since the start of the year.

The Bank of Russia also said on Thursday, Dec 11, that GDP growth would be weak during 2015-16, as consumer activity weakened.

The World Bank has previously warned that the Russian economy will shrink by at least 0.7% in 2015 if oil prices do not recover.

The drop in the price of oil has also hurt the Russian economy.

The World Bank's estimate is based on a scenario of crude prices averaging at $78 in 2015. But if oil prices fell to $70 on average, Russia's output would shrink by 1.5%, it said, according to the BBC.

In late morning trade, North Sea Brent crude rose 63 cents to $64.87, up from Wednesday's low of $63.56 - the weakest in five years. Meanwhile, Us crude, which also hit a five-year low on Wednesday, rose 48 cents to $61.42.

Also on Thursday, Russia's top crude oil producer Rosneft said it had reached a preliminary agreement to supply India's Essar Group with 10 million tonnes of oil over a 10-year period.

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