beyondbrics

Russia’s central bank surprised markets by raising its policy interest rate a quarter of a percentage point to 8.25 per cent a year on Friday morning.

As beyondbrics reported, prime minister Vladimir Putin made it clear on Monday that fighting inflation was the government’s overriding priority. Inflation reached an annual rate of 9.5 per cent last month, well above Putin’s 7.5 per cent target for 2011.

But surging oil prices have taken the rouble to a 30-month high against the US dollar – helping the fight against inflation and making higher rates doubly unpopular among businesses.

Fifteen out of 20 economists surveyed by Bloomberg expected no change at the central bank’s Friday meeting. But Russia has made it clear where its priorities lie.