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Bank of Russia Sees Rate Drop to Near Inflation

Bank of Russia Sees Rate Drop to Near Inflation Bank of Russia Sees Rate Drop to Near Inflation

Russia’s central bank will probably reduce its key interest rate to near the level of inflation in two years if price growth eases to policy makers’ 4 percent target in 2017, Governor Elvira Nabiullina said to Bloomberg.

The benchmark, which is now almost six percentage points below the annual inflation rate, will be within “a close range” of the consumer-price index, depending on the situation in the economy, Nabiullina said in a Bloomberg Television interview on Tuesday. Russia’s inflation outlook will probably allow for further monetary easing as one-time factors that were behind the upswing in price growth are now fading and domestic demand is weakening, she said.

Rate cuts will continue “when inflation falls and when in our assessment inflation risks ease up,” she said. “If the situation will proceed as forecast and inflation will be at 7 percent in a year, that allows us to speak about rate reductions.”

Nabiullina, who took charge of the Bank of Russia in June 2013, is charting a course through the country’s first recession in six years after slumping oil prices stoked a currency crisis and helped paralyze investment and consumer demand. With inflation almost fourfold the central bank’s mid-term target, policy makers last month paused an easing cycle for the first time in 2015 after six percentage points of interest-rate cuts since January brought their benchmark to 11 percent.

 

Financialtribune.com