Cbank bases rate decision on 3-yr forecast, long-term factors

MOSCOW, Nov 28 (PRIME) -- The central bank decides on the key rate basing on a three-year forecast and on long-term factors, Central Bank Chairwoman Elvira Nabiullina said on Wednesday during the Russia Calling! business forum.

“Speaking of the key rate, there are several principles that are important here. First, we decide basing on a forecast. And a three-year forecast is of significant importance here if we don’t want our monetary policy to react late, because all monetary policy measures have an impact with a lag. Secondly, we base our decisions on stable tendencies, on long-term factors,” she said.

She said that the increase of value-added tax (VAT) to 20% from 18% from 2019 might have a long-term impact on inflation.

“There are some special aspects of the current economic development level and of the financial system, and it comes with unanchored inflationary expectations. This means that even short-term factors will have a secondary impact factors and will turn into long-term factors as inflationary expectations are unanchored. This is the way we expect the increase of VAT, which is in fact, a short-term factor, to have a long-term effect,” she said.

She also said that the central bank and the government should not force market players to have their deals in rubles, making ruble deals profitable instead.

“To make the ruble attractive for settlements, we have to make sure that the purchasing power of the ruble does not depreciate, inflation is low and of course a low ruble volatility for its use in international settlements. This is a very important factor in making the ruble attractive,” she said.

Nabiullina said that provision of loans to non-financial companies in Russia may rise by 7–10% in 2019, supporting the economic growth.

“We see that lending is growing actively, and average monthly lending to non-financial companies of the producing sector of the economy rose by about 1% in the second half of this year. This is about three times faster than in the first half. The same is true for lending to individuals, its growth dynamics are rather high,” she said.

“We expect that the increase in provision of loans will remain high in 2019, at about 7–10% for non-financial companies, and that it will support economic growth.”

End