23 Dec 2024 09:17

CBR made "very balanced" decision on key rate given rapid cooling of economy - minister

MOSCOW. Dec 23 (Interfax) - The decision of the Central Bank of Russia's (CBR) board of directors to keep the key interest rate unchanged at 21% is "very balanced" considering the cooling of the economy that is already underway, Economic Development Minister Maxim Reshetnikov said.

"We understand the argumentation that lay at the basis of this decision. We share these figures, we understand that the cooling of the economy is underway, that it is happening quite actively," Reshetnikov said.

He said the cooling of the economy is happening fairly fast and that "these processes can go quite far" before being reflected in official statistics.

"In the current scenario it's not for us to judge, but this is a very balanced decision," Reshetnikov said regarding the results of the CBR board's Friday meeting, at which it unexpectedly decided to leave the key rate unchanged at 21%, although the consensus forecast projected a hike to 23%.

He also said the government and CBR are working on balancing state support measures, investment processes and other factors that affect inflation.

"We and the Bank of Russia have a whole set of joint measures that also concern changing the approach to subsidized programs, so to speak, in strict monitoring and understanding to what extent we influence monetary policy with our policy of subsidizing interest rates. We have now established full monitoring and exchange of information and are preparing for the gradual change in the distribution of risks in this regard," Reshetnikov said.

"The second area of our joint work is issues concerning lending to state companies and understanding how loans are distributed in the economy so that as many loans as possible reach the private sector. And plus the government's anti-inflationary work that already exists, for example customs tariff policy, which we recently adopted with a fairly large package and are continuing to adopt," Reshetnikov said.

When making its decision to leave the key rate unchanged at 21% on Friday, the CBR's board said that "a more significant tightening of monetary conditions occurred than presumed by the October decision on the key rate," when it was hiked by 200 basis points from 19%. The CBR also said it would assess the advisability of raising the rate at its next meeting, which is scheduled for February 14, "taking into account the future dynamic of lending and inflation."