The Bank of Russia on Thursday raised key interest rates by a quarter of a percentage point to help the struggling economy tackle soaring inflation.

The central bank increased benchmark refinancing rate from 8 per cent to 8.25 per cent. It also increased the one-day fixed repo rate and the overnight deposit rate to 6.5 per cent and 4.25 per cent respectively.

The central bank said a steep increase in the rate of inflation in August and early September forced it to hike key interest rates.

Driven by higher food prices plus a planned hike in utility prices, rate of inflation jumped to 6.3 per cent on 10th of September year-to-year. The uppermost limit of the Bank of Russia’s target for year-end inflation rate has been set at 6 per cent.

The increase in the interest rate was a surprise, because most economists had been expecting the central bank to leave interest rates unchanged.

Expressing surprise on the hike in interest rates, Ivan Tchakarov, chief economist of Renaissance Capital, said, “It is inconsistent with their mission statement. It is designed simply to send a message to the market that we are a new, inflation-targeting bank."

The increase in interest rates by the Bank of Russia bucked the trend in BRIC countries, where sluggish growth is pressurizing central banks to cut interest rates.