Central Bank: tight monetary policy to persist in Russia

Central Bank: tight monetary policy to persist in Russia

There are no conditions for a mild monetary policy in the Russian economy so far, head of the monetary policy department Alexei Zabotkin said.

"If there is a situation when we see that inflation is sustainably below our target in the forecasted period, it will be a reason to consider whether a mild monetary policy is good," he said,

"There are no such conditions in the economy so far," PRIME cited Zabotkin as saying.

"There is the following assumption: all other things equal, if the situation develops in line with the basic forecast, the central bank’s preference is to adjust the key rate gradually," the head of the monetary policy department added.

On October 25, the Russian central bank last cut its key rate to 6.5% from 7%. The next meeting will take place on December 13.

In its latest statement, the central bank said that if the situation develops under its basic scenario, it will assess the possibility of reducing the rate at one of the board of directors meetings. 

According to the Ministry of Economic Development, Russia's inflation to reach 3-3.3% this year. According to the Central Bank, annual inflation is likely to finish this year closer to the lower boundary of the 3.2-3.7% range.

The former deputy chairman of the Russian Central bank, head of the finance, monetary circulation and credit department at RANEPA, Alexander Khandruev, speaking to Vestnik Kavkaza, noted the Central Bank can't soften monetary policy, while inflationary expectations of the population are at a high level of 7-8%. "The Bank of Russia is in an uncertain situation now. Inflationary expectations of the population are not decreasing, the potential for lowering is limited: not only loan interest rates, but also on attracted funds, so the behavior of depositors is changing. The most important thing is that the global economic downturn is becoming more likely, and it is possible that the oil price will approach $50 per barrel," he said.

"In connection with these factors, I think the key rate of 6-6.5% is adequate. It's unclear whether the Bank of Russia will lower the rate by 0.25-0.5% on December 13. It can be said for sure that no sharp movements in the monetary policy are expected. The ruble has shown the better dynamics in financial indicators over the past six months. In this regard, I think that the Bank of Russia takes a reasonable position, because lowering rates itself does not lead to an increase in economic activity: if there is no desire to make investments, then there will be no economic growth, if the incomes of the population stagnate, how will consumer demand recover? Therefore, indeed, there are no conditions for easing the state’s monetary policy," Alexander Khandruyev concluded.

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