Cbank promises modestly tough policy, may cut rate at end of 2019

MOSCOW, Nov 21 (PRIME) -- The Russian economy still runs inflation risks forcing the central bank to maintain a tough monetary policy, although the central bank may start cutting the key rate at the end of 2019Central Bank Chairwoman Elvira Nabiullina said on Wednesday.

“Considering the external factors and such internal factors as the increase of value-added tax, the balance of risks in the economy and inflation has shifted to the proinflation risks. This means that the monetary policy should be kept to some degree tougher than if there were no such risks,” she the State Duma, the parliament’s lower house.

But she added, "We do not rule out that we will return to the cycle of rate cuts, at the end of 2019, if things go under our key scenario.”

Nabiullina also said that a rise in the interest rates for retail deposits, following a hike of the central bank’s key interest rate, has made them more attractive for Russians. She added that interest rates on loans rose simultaneously, but they are still affordable.

In September, the regulator raised the key interest rate to 7.5% for the first time since December 2014.

The chairwoman added that the central bank does not rule out that it may resume a cycle of key rate reduction in late 2019.

Sanctions cause negative, but temporary effect. Russia’s economy and the financial system are adapting to them, Nabiullina also said.

“As we’ve seen in previous years, the sanctions trigger a negative, but time-limited effect. In the end both the economy and the financial system get used to them,” Nabiullina said.

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