36828
Russia Says Can Meet Inflation Target 
World Economy

Russia Says Can Meet Inflation Target 

Russia’s Central Bank expects to reach its inflation target of 4% by the end of 2017 even if oil prices remain close to current levels, said Governor Elvira Nabiullina.
Her comments indicate the bank remains optimistic about inflation trends—and with them the possibility for lowering interest rates—even though oil prices have fallen much further than previously expected, adding to economic strains, Reuters reported.
“If one is talking about the base scenario, with a price of $30-$35 per barrel, we see that we can reach our goal of 4% inflation in 2017 without raising rates,” Nabiullina said in an interview.
She said that under its base scenario, in which the oil price is assumed to average $35 per barrel in 2016, the bank did not envisage a need to raise its key policy rate to reach its inflation target, if there are no additional external shocks.
However, in the alternative “risk scenario,” which assumes the oil price averages $25 per barrel, the bank may need to raise rates.
“In the risk scenario it will be necessary to look at what happens to inflation risks. ... If inflation risks rise we are ready to increase the key rate,” she said.
The bank may reduce its policy rate under both scenarios, she said, but it may come down later and “a bit more slowly” in the risk scenario as inflation would also fall more slowly.

   Inflation Worry
Low oil prices complicate the task of lowering inflation because they weaken the ruble, pushing up import prices, but also threaten to delay Russia’s recovery from a slump that shrank its economy by 3.7% in 2015.
Worries about inflation mean the bank has left its policy rate on hold at 11% since July, but inflation fell into single digits in January for the first time since November 2014.
The bank has long sought to reduce inflation by the end of 2017 to 4%, the target it uses as its main policy guide.

   No Rush
Nabiullina also said the bank had not changed its intention to raise its international reserves to $500 billion, but said this was “a guide not a target” and that the policy would only be resumed “when markets are stable enough and there is a possibility (for reserve accumulation).”
She said that while it was possible for the forex market to stabilize at an oil price of $30-$40 per barrel, “neither in the base scenario nor in the risk scenario do we assume an accumulation of reserves.”
Her comments suggest that the bank is in no hurry to resume the policy of purchasing foreign currency on the market that it briefly pursued between May and July last year.
Russia’s international reserves presently stand at $382 billion, well below the $500 billion that Nabiullina said last year represented a desirable long-term level.

 

Short URL : http://goo.gl/FxRUOQ
  1. http://goo.gl/iJk8BE
  • http://goo.gl/0MeIun
  • http://goo.gl/781VT5
  • http://goo.gl/1h3tDE
  • http://goo.gl/NPfY9q

You can also read ...

While China tries to alleviate its demographic crunch, the aging society means a pension shortfall.
Forget that image of sweatshops making all kinds of cheap...
Russia Economic Recovery Underway
Retail sales in Russia picked up in April, while real wages...
In 2017 banks had total mortgage lending of around $352 billion.
High levels of household debt are the greatest risk to Sweden’...
Greece at Crucial Point
Discussions are heating up over future debt repayments for...
Saudi Gov’t Told Not to Boost Spending
The International Monetary Fund urged the Saudi government not...
Peru Economy Strengthens
Economic growth in Peru strengthened in the first quarter...
Brazil CB Keeps Rates on Hold
Brazil’s central bank considered cutting interest rates last...
EU Tells Italy to Cut Debt, Warns of Euro Spillover
Italy’s incoming government should aim to cut its heavy public...

Trending

Googleplus