Russia raises rates amid more signs of economic weakness in Europe and Asia

Russia raised interest rates on Friday. Bloomberg reports:

Russia’s central bank raised its main interest rates for the second time this month in a bid to make the weakening ruble more attractive to investors, cap capital outflow and damp “inflationary trends.”

The refinancing rate will rise to 13 percent from 12 percent on Dec. 1, Bank Rossii said in an e-mailed statement today. The interest rate for one-day and seven-day loans from the bank in repurchase auctions will climb to 10 percent from 9 percent.

The mention of inflation looks out of place in today's environment. Inflation is already fast receding in much of the rest of Europe. From Bloomberg:

Europe’s inflation rate fell by the most in almost two decades and unemployment increased, adding to pressure on the European Central Bank to continue cutting interest rates to battle the recession.

Inflation in the euro area slowed to 2.1 percent in November from 3.2 percent in October, the European Union’s statistics office in Luxembourg said today. The drop is the biggest since at least 1991 and puts the inflation rate at the lowest in more than a year.

The fall in the inflation rate is consistent with a deteriorating economy and rising unemployment.

A separate report today showed the euro-region unemployment rate rose to 7.7 percent in October from 7.6 percent in September, the highest level since January 2007. That follows data yesterday that showed European economic confidence dropped to a 15-year low in November, while retail sales fell the most in at least five years.

Meanwhile, the Japanese economy may be set for a bigger slump than expected. From AFP/CNA:

Japanese factory output slumped and consumers tightened their purse strings in October as recession took a tighter hold on Asia's largest economy, official figures showed Friday.

Japan's industrial production tumbled 3.1 per cent from the previous month as manufacturers slowed their factory lines to cope with the worst financial crisis since the Great Depression, the government said.

The drop was bigger than market forecasts of a 2.6 per cent decline. Manufacturers said they expected output to tumble 6.4 per cent in November and a further 2.9 per cent in December.

Consumer spending dropped 3.8 per cent in October from a year earlier as Japanese households grew more reluctant to splurge following months of grim news on the economy and the plunging stock market...

One bright spot in an otherwise dismal batch of reports on the world's second-largest economy was an unexpected reduction in the unemployment rate to 3.7 per cent in October from 4.0 per cent in September.

But there were only 80 job opportunities for every 100 job seekers, suggesting that it is becoming more challenging to find work...

Core inflation slowed to 1.9 per cent in October as oil prices fell and a stronger yen reduced the cost of imports, adding to concerns that Japan may slip back into deflation.

South Korean industrial production was also down in October, falling 2.3 percent.