Russian central bank cuts interest rates to record low

The strength of the rouble is one of the reasons for the rate cut

Russia's central bank has cut interest rates from 9.5% to a record low of 9% in a widely expected move.

It is the ninth time the bank has cut rates since April this year as it bids to stimulate demand.

In an accompanying statement, the central bank said it had room to cut as inflation had been easing back. The move will take effect on Wednesday.

Russia's economy is suffering from the worldwide economic slowdown, although latest figures showed growth of 13.9%.

That strong growth - for the July-September quarter - suggests that the country is beginning to recover from the downturn.

The Russian economy, which is heavily reliant on oil exports, was one of the worst hit by the global crisis.

The rebound in the oil price since the start of this year has helped the economy to recover.

Hot money

But within Russia, bank lending is still sluggish - something the authorities are keen to change.

"Lending activity of Russian banks is still at a low level, and internal demand remains insufficient to ensure [the] stable growth of manufacturing," the central bank said in a statement.

Another reason for the cut is the flow of speculative money into Russia, which is making the rouble stronger than policymakers would like.

The central bank said the new lower rate would "contribute to restraining the appreciation of the rouble".

Year of recession

Some experts are worried that the strength of the currency could unseat the recovery.

Despite the recent growth, the economy remains on course for a sharp contraction over the year as a whole.

Earlier this month, the Organisation for Economic Co-operation and Development (OECD) forecast that Russia's economy for the year would contract by 8.7%, before starting to recover in 2010.

Analysts believe there is a chance of another rate cut before the end of the year, although of a more modest size.