Russia’s Economic Development Minister Alexei Ulyukayev considers it necessary to return the Russian Central Bank key interest rate to the level of early December when the market stabilizes.
On December 15, dubbed “black Monday”, the ruble nosedived by over 20 percent, the worst collapse of the ruble since the 1998 Russian financial crisis. As a responsive measure, Russia’s Central Bank increased its key interest rate from 10.5 percent to 17 percent in an attempt to limit substantially increased ruble depreciation and inflation risks.
Following the Central Bank’s measures, on December 16 Russian ruble saw another major slump but strengthened its position against US dollar by the evening. Currently, the ruble is gaining strength against the dollar.
Earlier this month, before December12, the key rate was 9.5 percent.
“The situation is becoming prohibitive for almost all borrowers, except the exporters. That is why it is necessary to go back to the previous level of the interest rate. The aim [of increasing the key interest rate] was to overcome the currency shock and we have managed to do it. If we see the stabilization is steady, I think we can return the interest rate to the level of early December,” Ulyukayev said in an interview with Russian newspaper Komsomolskaya Pravda.
The Russian economy has been affected by decline in oil prices, as the country’s budget is highly dependent on energy exports. According to a number of top Russian officials, another reason for a downturn in Russian economy is Western sanctions that were imposed on Moscow against its alleged involvement in the Ukrainian crisis.