Russia raises the interest rates to 9.5%

The Russia’s Central Bank has raised its key interest rate from 8% to 9.5% as it seeks to tackle inflation.The 1.5% increase is higher than expected, with analysts having forecast a rise in the interest rate by 0.5%.

The bank already raised the rates from 5.5% at the beginning of the year but the move failed to suppress inflation. The weak rouble and a ban on western food imports has been keeping the inflation stubbornly high.

‘If external conditions improve and a persistent trend for lowering inflation and inflation expectations emerges, the Bank of Russia will be ready to start easing its monetary policy,’ said the central bank. The new rate will take effect on 5 November. The last raise was imposed in the end of July.

The central bank said that the inflation had reached 8.4% and would remain above 8% until the end of March.

Economic growth is expected to almost grind to a halt during the final three months of this year and the first quarter of 2015.

The rouble got briefly firmed after the bank’s decision was announced but then fell back into the negative area.

The rise comes as Russia has said it will resume delivering natural gas to Ukraine after Kiev makes its first payment for previous supplies next week.

Trade dispute

Meanwhile, the European Union said it had launched a trade dispute with Russia at the World Trade Organisation (WTO) to challenge Russia’s treatment of European agricultural and manufactured goods.

The WTO said the EU had accused Russia of levying higher-than-permitted tariffs on a range of goods including paper, palm oil and refrigerators.This dispute is the fifth case involving Russia and the EU that has been brought to the WTO.