Russia Says Has Liquidity Surplus
World Economy

Russia Says Has Liquidity Surplus

The Russian banking system has a liquidity surplus, Minister of Economic Development Alexey Ulyukayev said on Wednesday at the meeting with the Finnish business community.
“Our situation with banking liquidity has changed fundamentally this year. We experienced liquidity deficit and banks resorted to support of the Central Bank before February. Such support reached 5-6 trillion rubles ($75.9-91.1 billion)—this was refinancing. No, we have no deficit but we are in the situation of liquidity surplus,” Tass quoted Ulyukayev as saying.
Banks start lowering their interest rates in such situation, the minister added.
Chances are higher that ruble will become stronger instead of weakening, Ulyukayev said.
“The national currency has become much stronger. The forex market is the ratio of demand and supply but chances are greater for strengthening than for weakening. This is because the payment balance will be positive this year and probably in years to come,” the minister said.
The trade balance will improve owing to the good market situation, including the oil market, UIyukayev said. Dynamics of the current account of payments balance will also be positive, he said. “We expect the current account surplus will be $60 billion, $65 billion, or $70 billion this year and in coming years,” the minister added.
According to the minister, Russia’s Central Bank could have been quicker with lowering its key rate, the current inflation rate allows it to do so.
“The central bank is in no haste to lower the key rate, which in my opinion, it should, because the inflation rate is decreasing very fast,” he said.
In 2015, inflation in Russia was 12.9%, now it is 7.3%, and the key rate is 11% per annum, Ulyukayev said.
“There is a huge gap between them. As a rule, this is not the case in other countries, so there are opportunities for reduction,” the minister said.
Ulyukayev said that at the same time when it makes a decision on the key rate the central bank is guided not by the current but future inflation. At the end of 2016 it could reach 6.5-7%, the minister added.

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