Although Russia has been reaping the gains of high oil prices in the last few years, the influx of petrodollars presents a danger of increasing the money supply and pushing up consumer prices, which has prompted the Central Bank to remove surplus money from the economy. High consumer price growth at the start of the year prompted the government to raise its annual inflation rate forecast from 8.5% to 9%.
Alexei Ulyukayev said the CBR had raised deposit rates twice in the past two months - overnight and one-week deposit rates rose to 1.5-2% p.a. from 0.5-1% p.a. - and would seek to take further action.
"We will probably continue this activity in the future," he said.
Ulyukayev added the Central Bank had not used this instrument of monetary regulation in 2005 due to the fears of capital inflows from overseas, but the decisions made by the U.S. Federal Reserve and the European Central Bank on interest rate increases this year had enabled the CBR to consider raising deposit interest rates.
