The powerful private capital inflow boosted money supply. The M2 aggregate rose by 39% in 2005, and by 49% in 2006. In order to restrict money supply growth, the Central Bank raised interest rates on commercial banks’ deposits with the Central Bank several times in 2006 and 2007. Currently, the interest rate on oneweek deposits is 3%.
We are very cautious here, and are closely monitoring interest rates on international markets. A large rise in interest rates on deposits attracted by the Central Bank could lead to an additional inflow of speculative capital and make deposit operations useless. Recently, in May 2007, the Central Bank raised the required reserve ratio from 3.5% up to 4.0-4.5%.