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ST. PETERSBURG, May 26. /ITAR-TASS/. Russia's economy is not ready for a floating ruble exchange rate given the threat of excessive volatility and high interest rates which had already slowed growth, presidential aide Andrei Belousov told ITAR-TASS at the St. Petersburg International Economic Forum.
The Central Bank of Russia plans to cease intervention to support the ruble from next year were hasty, he said. Moreover, the bank itself was concerned that exchange rate fluctuations pushed up the interest rate. "This connection is obvious and noted by many experts. I know this issue is being discussed at the bank,” he added.
Lending rates stood at 4-5% last year due to considerable volume of short-term ruble deposits and corporate current accounts while the average lending rate for the real economy companies was 10-11%.
The volatile ruble encouraged companies and the population to actively convert money into foreign currency, Belousov said. It deprived banks of their funding base for ruble lending and led to further interest rate growth.
This resulted from hasty moves to a floating exchange rate, which should be preceded by export diversification and creation of a range of foreign exchange hedge instruments.
“Since our exporting is 90% dependent on a narrow group of raw materials such as energy resources and on some highly volatile metals, pegging the exchange rate against global prices for these metals is highly risky,” Belousov said, expressing hope that recent events had given the bank "food for thought”.