World Economy

Russia Says Still Room for Interest-Rate Cut

Russia Says Still Room for Interest-Rate CutRussia Says Still Room for Interest-Rate Cut

The Bank of Russia has room to cut interest rates further as the country’s double-digit inflation rate is likely to slow soon, a top Russian government official said on Friday.

Speaking to reporters on the sideline of an annual investment forum in Black Sea town of Sochi, Economy Minister Alexei Ulyukayev said he sees reasons for more monetary easing, Dow Jones reported.

“Indeed, there is rationale for a lower key rate... The current situation with inflation is improving,” Ulyukayev said.

The comment from Ulyukayev, who used to oversee the monetary policy at the Bank of Russia before moving to the economy ministry, suggests that the central bank may cut rates sooner than later.

A month ago, when the sharp recent declines in the value of the ruble were feeding through to inflation, Ulyukayev said the central bank should act carefully. The central bank subsequently put rates on hold after cutting them five times earlier this year in an effort to bolster Russia’s stuttering economy.

Ulyukayev said that full-year inflation is seen at 12.2%, above the central bank’s target of 4%.

The Bank of Russia will hold its next board meeting on October 30, where it is widely expected to keep the key rate unchanged at 11%. Commenting on Moscow’s attempt to collect more taxes to plug holes in the budget as the drop in oil prices has crimped government revenue, Ulyukayev said it was possible to increase the debt burden on established oil projects. Moscow would avoid the imposition of higher taxes on “difficult” oil fields and offshore projects reliant on foreign technology and equipment, he said.

Russia is still capable of switching to a diversified economy, Chief Executive Officer of Russia’s top lender Sberbank Herman Gref said at the same forum.

“Today we’re still capable of switching to a modern and diversified state of economy without serious losses. We have all resources just everyone has to bend every effort to avoid the need for Russia to face the choice of giving away its shirt off back,” Gref said.