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Central Bank’s key rate hike unlikely to help ruble — expert

December 11, 2014, 19:22 UTC+3 MOSCOW
Russia's Vnesheconombank CEO believes the current rate hike will not help the ruble, but the measure will have a negative effect on the economy
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Andrey Klepach

Andrey Klepach

© ITAR-TASS/Vladimir Astapkovich

MOSCOW, December 11. /TASS/. The Russian Central Bank’s decision to hike the key rate to 10.5% is unlikely to help the ruble but will have an adverse effect on the economy, national development bank Vnesheconombank (VEB) Deputy CEO Andrey Klepach said on Thursday.

Russia’s Central Bank made a decision on Thursday to raise the refinancing rate to 10.5% from 9.5% amid accelerating inflation and the depreciating ruble. The regulator said in a statement it was ready to continue raising the key rate, if inflation risks intensified further.

“I don’t think the Central Bank needs to further raise rates and I don’t think that the current rate hike will help the ruble. But this will have a negative effect on the economy,” he said.

A key rate hikes generally has a negative effect on lending activity but “the rates are already quite high and therefore one percentage point changes little and this decision will hardly be significant,” he said.

It is more important to ensure that some mechanism starts to work or is established for the provision of long-term money to the economy either through spending from the National Welfare Fund or through other mechanisms proposed by the Central Bank, Klepach said.

“But this does not work so far,” the expert said.

The Russian government has possibilities to prevent recession in 2016 and considerably limit its scope next year, the VEB deputy CEO said.

“But for this purpose, at least something has to be done, including the provision of long-term money at affordable rates. But this is not being done so far,” he said.

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