Cbank hopes to resume key rate cuts in late 2019–early 2020

MOSCOW, Oct 8 (PRIME) -- Russia’s central bank hopes it would be able to resume ñutting its key rate in late 2019 or early 2020, Alexei Zabotkin, head of the regulator’s monetary policy department, said on Monday at a meeting of an expert council of the parliament’s lower house State Duma on the monetary policy.

The central bank raised its key rate to 7.5% from 7.25% on September 14.

“The increase was caused by our concern that inflationary expectations may grow faster than forecast in our baseline scenario at the beginning of next year because of overlapping impacts from VAT and from a delayed reaction of currency rates. The risks are closer to the more pro-inflation trajectory. So, the increase of 25 basis points is a rather moderate increase,” Zabotkin said.

“And we greatly hope…that the decision that was well-considered would allow us to return to reduction of the real interest rate in not so distant a future. Now the central bank expects that it may happen at the end of 2019 or in early 2020,” he said.

The range of the real neutral rate remains at 2–3% given possible inflation of 5–5.5% in 2019. The key rate of 7.5% means a neutral monetary policy, he said.

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