Russia unexpectedly left interest rates on hold on Friday, taking advantage of a slight easing in inflation to raise only its reserve requirements in a move to curb liquidity and discourage any speculative rouble rally.
The rouble gave up most of its early gains after the decision, which disappointed investors who had been hoping for a hike to push up yields on Russian assets, although analysts said the central bank would eventually resume rate hikes.
The central bank did not mention the rouble in its statement, but it lifted its minimum reserves requirements, which it has used in the past to offset short-term capital inflows due to the increased appeal of the Russian currency. It left the overnight deposit rate, seen as its most effective tool in reducing rouble liquidity, unchanged at 3 percent, while most economists had expected a 25 basis point hike.
The central bank increased minimum reserve requirements by 100 basis points for liabilities for non-residents, and by 50 basis points on all other liabilities.
"The decision has been made because of the continued expectations of high inflation and the risks to economic growth," the central bank said in a statement.
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