Cbank chairwoman sees prerequisites for key rate cut in 2019

WASHINGTON, Apr 15 (PRIME) -- The central bank sees more prerequisites for reduction of the key interest rate than for increasing it in 2019, Chairwoman Elvira Nabiullina said on April 13.

“If the situation evolves in line with our basic scenario, downward movement is, of course, more likely than upward. I would like to repeat that we see a possibility for softening this year, but we cannot announce the exact date,” she said.

“We need to watch the inflation, inflationary expectations, the economy, external factors. If they meet our forecasts, (the key rate will be reduced) this year.”

In March, the central bank retained the key rate at 7.75% annually.

Nabiullina said that the central bank sees no reasons for revising its 2019 forecast for Russia’s gross domestic product.

“Our forecast is a wide range of 1.2–1.7%, and we see no reasons for revising it… At the beginning of the year the economic growth slowed down due to a value added tax hike… but we hope that in the second half of the year implementation of national projects will give positive results.”

The ruble is weaker now than in 2018, which still contributes to inflation, but Russia seems to have already passed the inflation peak. The central bank may revise the inflation forecast after collecting new data, the chairwoman also said.

Oil prices are influencing the ruble rate and the budget less than they used to several years ago, Nabiullina said and added that foreign currency interventions by the central bank to stabilize the national currency rate in a situation of no significant external shocks may hurt the investment climate.

Russia’s foreign currency and gold reserves exceed the foreign debt, and the central bank strives to diversify the reserves because of economic and non-economic factors. It also prefers a conservative monetary policy to mitigate the effect of possible sanctions, she said.

Nabiullina also said that the Russian banking sector’s profit in 2019 will not be below 1.34 trillion rubles seen in 2018.

(65.5171 rubles – U.S. $1)

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