Russia’s Main Rate May Rise in First Half, Sberbank’s Gref Says

Russia’s central bank will probably raise its benchmark interest rates in the first half of next year as inflation accelerates, said German Gref, the chief executive officer of OAO Sberbank, Russia’s biggest lender.

Policy makers are weighing the first rate increase since 2008 after inflation accelerated to the fastest pace in 11 months in November. The International Monetary Fund on Dec.9 urged Russia to focus "squarely on reducing inflation" as the lender raised its 2010 price-growth forecast to 8.5 percent from about 6 percent.

"High inflationary expectations are the main and most powerful driver," Gref told reporters late yesterday. "I think that we will see a rate increase in the first half. The main question for next year is how high inflation will be."

The central bank lowered its main refinancing rate 14 times between April 2009 and May this year. Since then, it has kept the rate at 7.75 percent as policy makers sought to put a lid on consumer-price growth without damping the economy’s recovery from a 7.9 percent slump last year.

The main problems facing Russia next year are the investment climate and higher taxes, Gref said. Russia will implement tax increases next year equivalent to about 2 percent of gross domestic product, Finance Minister Alexei Kudrin said on Nov. 19. The government needs to boost taxes to help meet its spending plans, including a 9 percent increase in pensions in 2011, according to Prime Minister Vladimir Putin.

"We see weak capital inflow and this problem" of the investment climate "will remain," Gref said.

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