Russia’s Central Bank Counters Critics as Real Rates Near Zero

Russia’s central bank mounted a defense of its monetary policy after coming under criticism for choking credit with high borrowing costs, saying it offers funding to lenders at real rates at or below zero.

“We always take into account the situation in the real sector of Russia’s economy, including aspects of inflation, and external circumstances within which the economy functions,” Bank Rossii First Deputy Chairman Alexei Simanovsky told reporters today in Moscow. The regulator extends funding to banks at about 6.5 percent, or a real rate of “zero or maybe even below that,” adjusting for inflation, he said.

Policy makers have resisted government pressure to ease monetary policy to kickstart the economy, holding the refinancing rate at 8.25 percent for a fifth month on Feb. 12 and keeping the overnight and one-week repurchase lending rates at 5.5 percent. The inflation rate was 7.1 percent in January, jumping from 6.6 percent the previous month.

President Vladimir Putin said at the end of January that borrowing costs “substantially” higher than inflation were a source of concern. Billionaire Oleg Deripaska said last month that the central bank’s policies “sucked all blood from the Russian economy.”

The refinancing rate is indicative and doesn’t reflect the cost of central bank funding for commercial lenders, Simanovsky said, rejecting critics’ characterization of Russia’s rate policy as “tight.”

Bank Rossii, which has no single policy rate, has discussed the future of the refinancing rate and has considered replacing it with an average of the interest-rate corridor, according to Simanovsky. The rate can’t easily be relinquished because of its role in taxation and budget policy, he said.

The ruble traded at 30.1445 per dollar at 7:43 p.m. in Moscow, compared with 30.1340 on Feb. 15. It has gained 0.5 percent this year, the fifth-best performance among more than 20 emerging-market currencies tracked by Bloomberg.

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