Central bank still expects inflation to return to 4% target in 2024

MOSCOW, Nov 16 (PRIME) -- The central bank will manage to bring Russian inflation close to the target level of 4% in 2024 and start reducing the key rate from the current level of 15% annually, Chairwoman Elvira Nabiullina said on Thursday during a session of the parliament’s lower chamber State Duma.

“Our baseline scenario shows that we will get inflation to the target level of 4% next year meaning we will be able to start reducing the key rate,” she said.

Still, the key rate will remain high for some time so that the inflation momentum dies down and the economy digests the record amount of loans issued over the past 12 months, she said.

At the same time, the central bank is concerned that expansion of mortgage lending is coupled with higher prices and worsening quality of housing that could trigger future problems.

“Lending to individuals is rising as well, especially in the mortgage segment. Growth is very high here, an increase of 32% year-on-year, meaning that the mortgage loan portfolio gained one third over the past 12 months,” she said.

“We are obviously concerned with the fact that this growth is accompanied with an increase of housing prices and worsening of mortgage loans because the loans are provided to the eborrowers with an already high debt burden. It can turn into great risks for the banks and for the borrowers in the future.”

The regulator and the government should discuss differentiation of the cheap mortgage program with one of the ways being differentiation on the basis of income, she said.

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