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WRAPUP 1-Russia eyes crisis end, wary of speculative inflows

Published 01/20/2010, 11:00 AM
Updated 01/20/2010, 11:03 AM

* C.bank could raise interest rates in H2 after cuts in H1

* Optimal oil price $70-80 a barrel - c.bank official

* Bank reserve requirements could be raised

* No need to follow Brazil in taxing inflows

(Adds details, background)

By Toni Vorobyova and Yelena Fabrichnaya

TULA, Russia, Jan 20 (Reuters) - Russia's economic recovery may lead to tightening of interest rates later this year and banks' required reserves may also be raised as it addresses problems with excessive inflows of speculative capital, a senior central banker said on Wednesday.

A recovery in oil prices and the stabilisation of the rouble have brightened Russia's economic prospects and seen the return of investors keen to cash in on high emerging-market yields.

With oil now in an "optimal" $70-80 a barrel range, economic growth this year could be as high as 5 percent, Alexei Ulyukayev, first deputy chairman of the central bank, said.

The budget deficit could be smaller-than-expected and net capital inflows may resume after two years of outflows, he added. But such a scenario brings its own risks.

"We are looking at a spectrum of measures so that the downsides linked to the possible overheating of the economy and the scope for carry trades -- short-term capital inflows which destabilise finances -- are somehow smoothed out," he said.

Such measures, he said, could include raising banks' reserve requirements -- as done by China earlier this year -- as well as introducing higher reserve requirements for foreign currency liabilities than for rouble ones.

His comments echo those of other Russian officials. The finance ministry is starting to monitor corporates' foreign borrowing, and, in future, limits on such debts could be introduced for state-controlled companies.

The central bank has also submitted to the Finance Ministry a previously aired proposal to make foreign currency borrowing less attractive from a tax point of view. Ulyukayev said the plan had the backing of Finance Minister Alexei Kudrin.

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