3rd Interest Rates Hike Announced

The Central Bank said Monday that it would raise three key interest rates by 25 basis points, the third increase this year as the bank battles the inflationary effects of soaring commodity prices.

"This measure, this increase in lending rates, is targeted at raising the cost of borrowing, which is a general method for lowering inflation," Central Bank deputy chairman Konstantin Korishchenko said.

The bank said it would raise the deposit rate, the one-day repo rate and the refinancing rate as of Tuesday.

The one-day repo rate will climb to 6.75 percent from 6.5 percent, while the refinancing rate will go up to an annual rate of 10.75 percent from the previous 10.5 percent, the Central Bank said in a statement.

Annualized inflation has already exceeded 15 percent in Russia, and the Organization for Economic Cooperation and Development has predicted that it will reach 13 percent in 2008, though officials stick to lower forecasts.

In its fight against inflation, the bank has so far limited itself to rate increases, keeping other measures in reserve. But the Central Bank may be forced to get out the big guns, following oil's biggest one-day price gain in history on U.S. futures markets Friday, Danske Bank analyst Lars Rasmussen said.

"Given the strength of the Russian economy, we do not think that the Central Bank is done yet -- especially not with oil prices just below $140 per barrel," he said.