Keeping the key rate at 8.5% would lead to an exchange rate "well into three digits" - CBR Deputy Chairman

MOSCOW. Sept 20 (Interfax) - Maintaining the key rate at 8.5% could lead to a weakening of the ruble to a figure "well into three digits," Deputy Chairman of the Russian Central Bank, Alexei Zabotkin said in the State Duma.

"From the standpoint of how much the key rate influences the exchange rate. It is very difficult to talk in terms of "if only," but I think my colleagues with an economic education would confirm that if the rate had remained at 8.5%, then we would now be looking at a different level for the exchange rate, which would most likely be well into three digits [the ruble would be noticeably weaker than the 100 ruble/$1 mark]. And in this sense, the rate had an impact," Zabotkin said.

"Again, looking at the dynamics of the exchange rate, in recent weeks it has, in principle, fluctuated in a fairly narrow range. Again, this does not mean that it is certainly possible to say in which direction it will move next. An important message: I would very much like business and citizens to realize that there cannot be a situation in which the exchange rate is weak and inflation is low. Therefore, if we target low inflation, then the exchange rate will behave accordingly because of this strategy. There may be one-time and significant adjustments because our gas export volumes have fallen, price ceilings have been imposed on us, and there are some interruptions in the processing of payments, etc. There may be one-time surges, but what we want to avoid is that self-sustaining weakening of the ruble," Zabotkin said.

He cited Turkey as an example. "The trajectory of the Turkish lira over the past three years shows what is happening in an economy where the interest rate does not meet inflation expectations," Zabotkin said.