YALTA, June 15. /TASS/. The decision of the Central Bank to lower the key rate is a moderate step in the right direction but moves should be more aggressive, Russian Minister of Economic Development Alexey Ulyukayev said on Monday.
"This is a step in the right direction but one should be more aggressive. 100 basis points are a very small step, a step in proper direction but very limited, I would say. Steps need to be more aggressive," the minister said.
Ulyukayev did not identify any limits for optimal lowering of the key rate. "I will not indicate figures but I reiterate, it [key rate lowering] might be more aggressive," the minister said.
The Board of Directors of the Bank of Russia decided today to lower the key rate to 11.5% from 12.5% as of June 16.
The Russian Central Bank can raise the key rate to prevent a collapse of the market and to even-out exchange fluctuations. With a low rate, banks can borrow rubles from the Central Bank, buy currency and with the ruble depreciation cover costs of paying interest on the loan. With an higher rate such speculative operations become more risky. At the same time, if the rate grows, the loan cost for businesses and households also increases - there may be difficulties with the refinancing of already issued loans. This may lead to a slowdown in economic growth.
Until 2013, the refinancing rate was the main discount rate. It was first set in 1992 at 20% per annum, in 1993-1996 it reached the level of 210%, then fluctuated between 20%-50%, and after the peak in May 27 - June 4, 1998 (150%) decreased gradually. The minimum refinancing rate level was set on June 1, 2010 and remained in force until February 28, 2011 - 7.75%. The current refinancing rate of 8.25% was set on September 14, 2012, although by the beginning of the 2010’s it was used only as a tool for calculating fines, penalties, and a benchmark for the minimum amount of interest on ruble deposits of the population, and loans to banks were issued using other instruments, especially repo transactions.