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Russia’s Central Bank may cut basic rate to 8.5% by end of 2017

July 12, 2017, 21:25 UTC+3 YEKATERINBURG
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YEKATERINBURG, July 12. /TASS/. The Central Bank of Russia (CBR) will continue cutting down the basic rate after a certain interval caused by an unexpected jump of inflation in June, Deputy CEO and chief economist of Russia’s Vnesheconombank (VEB), Andrei Klepach told TASS on Wednesday.

"I hope that, after a certain pause, the CBR will reduce the basic rate to 8.5%," he said on the sidelines of Innoprom 2017 international industrial fair.

The CBR described the 4.4% inflation surge as a shock and a highly unpleasant surprise. It said, however, the figure still did not pose a threat to the plans to press it down to 4.0%

Klepach warned against the attempts to cut the inflation rate with the aid of monetary instruments, saying steps of this kind would be depressive for some sectors of Russian economy.

"The exchange rate and interest rates are bad cures and God forbid we slash liquidity in these conditions," he said. "This will bring nothing but perils to the very same farmers, for instance."

A growth of prices for fruit and vegetables caused by bad weather in the center of European Russia may call into question the attainment of inflation objectives in 2017, Klepach said.

"The risks existing in this sphere can be linked much rather to the losses of fruit and vegetable crops because of bad weather and may call the achieving of financial objectives," he said. "The segment may see a serious hike in prices because of the losses of crops caused by endless rains and the prices there may go up steeply."

"This in turn may push general inflation up," Klepach said.

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