Russian Banks Plead for Interest Rate Cut as Borrowing Costs Spiral
Muscovites walking by currency exchanges, whose volatile rates the Central Bank rate hike failed to control.
Russian banks have urged the Central Bank to sharply cut interest rates to prevent a wave of corporate bankruptcies and collapsing demand for loans as Russia's economy heads for deep recession, the head of a banking association said Monday.
The regulator
hiked interest rates to 17 percent last month in a crisis measure to restrain the collapse of Russia's ruble currency, which has been dragged down by oil price falls and Western sanctions over Ukraine. The move helped cool panic on the currency markets, but sent the cost of borrowing skyrocketing.
One year ago, the Central Bank's interest rate was 5.5 percent. Despite a series of rate rises, inflation had soared past 11 percent by the year's end and the ruble had lost over 40 percent of its value to the U.S. dollar. A halving in the price of oil, Russia's main export, since last summer is set to push the country into a deep recession this year. Western sanctions have tightened access to credit, and rising borrowing costs will hamper growth still further.
Despite the negative effect on businesses,
analysts were skeptical that the Central Bank would hear the plea and cut rates soon. "We expect inflation to continue its growth through at least the first quarter this year, probably going beyond 14 percent in the first two months of 2015, which means the Central Bank will have no incentive to decrease its key rate," Tikhomirov said.
http://www.themoscowtimes.com/business/article/russian-banks-plead-for-interest-rate-cut-as-borrowing-costs-spiral/514253.html
The ruble fell sharply on Monday, dragged lower by a slide in oil prices and fears that ratings agency Standard & Poor's will downgrade Russia to junk in coming days.
At 8 p.m. in Moscow, the ruble was down 2.4 percent against the dollar at 63 rubles and 3 percent weaker against the euro at 74.5.
http://www.themoscowtimes.com/business/article/russian-ruble-weighed-down-by-dropping-oil-price-and-fitch-downgrade/514209.html