June 4 (Bloomberg) — Russia’s central bank cut the main interest rates for the third time in six weeks after government officials and policy makers suggested the economic slump in the world’s biggest oil supplier may have reached its low point.

Bank Rossii cut the refinancing rate, seen as the limit for borrowing, to 11.5 percent from 12 percent and lowered the repurchase rate charged on central bank loans to 10.5 percent from 11 percent, effective tomorrow. The bank cut rates for the first time since 2007 on April 24 and then again on May 13.

“The rate cut is certainly good for the economy,” said Alexander Zakharov, co-head of equities at the Metropol brokerage in Moscow.

Russian officials say there are signs the economic contraction may ease over the rest of the year. The central bank doesn’t rule out further cuts in the refinancing rate this year and may revise its inflation forecast to below 12 percent, deputy chairman Alexei Ulyukayev said, according to Interfax.

Oil prices between $60 and $70 per barrel are “fair,” President Dmitry Medvedev said in an interview with CNBC aired last night. With prices set to stay above $50 per barrel in the “near future,” the economy should stabilize, his top economic adviser Arkady Dvorkovich said yesterday.

Medvedev ‘Optimistic’

That may help the government contain a deficit expected to exceed 7.4 percent of gross domestic product this year as it deploys 3 trillion rubles ($97.6 billion) in stimulus spending.

“I want to believe the change in the oil price already reflects certain fundamental trends that are taking shape in the world economy,” Medvedev said on CNBC. Higher oil prices, slower inflation and unemployment in Russia and some evidence of stabilizing industrial production “put me in a very moderately optimistic frame of mind.”

The central bank said in April it will start a “trend toward further cuts” as inflation eases and after the recession deepened in the first quarter.

Russia is facing its biggest economic test since 1998, when oil prices dropped below $10 a barrel and the government defaulted on $40 billion of debt. National output slumped an annual 9.5 percent in the first quarter and may fall as much as 8 percent this year, Economy Minister Elvira Nabiullina says, after 10 years of expansion averaging almost 7 percent.

Inflation Target

The rate cuts in April and May were the first since the bank increased the cost of money to arrest the ruble’s 30 percent drop since August and prevent lenders using borrowed cash to speculate on the currency’s decline.

The slower pace of consumer-price growth will allow the central bank to lower the refinancing rate, which will reduce interest charged by commercial lenders, Bank Rossii Chairman Sergey Ignatiev said at a banking conference on May 28.

Inflation may slow below the government’s 13 percent target this year, Ulyukayev said in an interview last month.

Inflation in the year through June 1 slowed to 6.8 percent from 7.7 percent a year earlier, according to the Moscow-based Federal Statistics Service. Consumer-price growth fell more than economists expected in April, to an annual 13.2 percent.

“The ongoing easing of monetary policy is appropriate in light of the inflation outlook,” the International Monetary Fund’s Russia mission said in a statement on June 1, following meetings with government officials in Moscow.

The Washington-based lender cut its forecast for Russia’s economic growth in 2009 to 6.5 percent from 6 percent.

Citigroup yesterday downgraded Russian stocks to “underweight” from “overweight” on expectations the economy will remain weaker than other large developing nations and after a “huge run” in prices made valuations less attractive.

Russian stocks, the world’s second-best performing equities this year after Peru, fell the most in almost four months yesterday.

“We’re not sure we’ve hit the bottom,” Citigroup’s chief Moscow economist, Elina Ribakova, said. “We’ll see the effects of the government’s economic stimulus by the end of this quarter.”

To contact the reporter on this story: Paul Abelsky in St. Petersburg at pabelsky@bloomberg.net.

Posted by Shayne Heffernan on Jun 4th, 2009and filed underOil.You can follow any responses to this entry through theRSS 2.0You can leave a response by filling following comment form or trackback to this entry from your site