Rate decision balanced, gives time to analyze situation in industries, this will be handled by deputy Russian PM's government commission - industrial union head

MOSCOW. Dec 20 (Interfax) - The decision by the Central Bank of Russia to maintain the rate at 21% is balanced and makes it possible to track how tightened monetary policy is affecting the economy, head of the Russian Union of Industrialists and Entrepreneurs (RSPP) Alexander Shokhin told journalists.

The analysis of the effects of monetary policy and the balancing of government support measures will be handled by a new government commission led by Russian Deputy Prime Minister Alexander Novak, he said.

"It is a very balanced decision," Shokhin said when commenting on the CBR board of director's decision.

During a meeting on Monday between large businesses and Russian President Vladimir Putin, RSPP representatives expressed the view that the key rate at 21% is already beginning to affect both corporate and retail lending dynamics, and "it would be good to see the possibilities for adapting industry and the economy as a whole to the high rate," Shokhin said.

On Friday, the CBR board of directors decided to keep the key rate at 21%. "Monetary conditions tightened more significantly than envisaged by the October key rate decision [when it was raised by 200 basis points from 19%]," the bank said. At the same time, the bank promised to assess the need to raise the rate at its next meeting scheduled for February 14, "taking into account further lending and inflation dynamics."

The time frame for assessing further steps on the rate could have been longer, Shokhin said. "We actually thought we could wait until April," he said.

A few months are needed not only to analyze the effectiveness of the rate and other regulatory tools of the CBR, but also for the government to form a balanced budget impulse scheme, he said. "The Central Bank makes it clear that sometimes excessive subsidizing of certain projects can provoke inflation," Shokhin said. Now, before the CBR board of directors' next meeting, the government has time to decide "which industries, enterprises and so on will be supported under these conditions," he said.

Support should primarily continue for projects that have already been launched and implemented with various government support mechanisms, including SPIC, ZSPC, Project Financing Factory, FRP and others, the RSPP said. It is also necessary to analyze the feasibility of government support for supply chains and the situation of not only large holdings but also medium and small supplier companies. "We need to track the most sensitive product positions and so on, look at the chains," Shokhin said. A list of systemically important enterprises was previously compiled, he said, and it could be worth reconsidering the criteria for companies included in this list, which may have become too large.

The analysis of the situation in industries and at individual enterprises under current economic conditions will be handled by a special government commission chaired by Novak. The decision to create the commission was made following the meeting between business representatives and the Russian president.

"One of the specific outcomes of this meeting was the president's decision to create a government commission led by Alexander Novak, who will review the situation case by case. But this case by case approach must be based on sufficiently transparent and strict criteria for support," Shokhin said. It is expected that the government commission meetings will be held once a month.

An RSPP-Central Bank working group also continues to operate, with the bank represented by Deputy Governor Alexei Zabotkin.

"Overall, it seems to me that a mechanism for interaction between business, government and regulators, including the Central Bank, is emerging," Shokhin said.