Chair: Russian cbank plans to continue tough policy for 1.5–2 yrs

MOSCOW, Jun 16 (PRIME) -- The Russian central bank will continue its moderately strict economic policy for one and a half or two years, Chairwoman Elvira Nabiullina said at a press conference on Friday.

“I cannot say for sure how long it will be: a year and a half, two years, maybe less, maybe more, it is impossible to name a precise date. Because this mostly depends on how fast we will manage to reduce inflation expectations and what is crucial, solidify them,” Nabiullina said.

Inflation expectations reached a historical low of 10.3% in May, but is still higher than acceptable. As far as inflation expectations remain low for a long time, the central bank will be gradually cutting the key rate until it reaches 6.50–6.75%. “But it will take several years, we think.”

Russia’s average annual inflation has been at 5.6% for the last 12 months. A recent approach of annual inflation to the 4% target level is yet to prove stability.

An earlier proposed idea to introduce a target inflation range is premature, she said.

The central bank is discussing publishing forecasts for the key rate dynamics but needs to ensure that they will not imply any sort of commitment.

The central bank has a weighed and cautious approach to reduction of the key rate, and pauses in the key rate reduction are possible for many central bank board of directors meetings.

“We do not rule out pauses, if risks of which we were talking about come true,” Nabiullina said.

The authority believes that oil prices will be close to U.S. $40 per barrel in 2018–2019. “But we think that this will not significantly influence the economic growth rate, taking into account the fact that the economy has already mostly adapted to a low level of oil prices,” she said.

But the baseline average oil price forecast for 2017 remains at $50.

Nabiullina believes that the foreign economic situation will most probably remain unstable.

The central bank does not see a high impact of a recent scale-up of the U.S. sanctions on the Russian financial market, and the effect of the earlier measures has almost faded.

The central bank has also noticed a tendency of households to save less and will monitor it carefully, Nabiullina said.

“The population has started to fulfill earlier postponed demand for durable goods, household equipment and cars. It is important that households are raising their spending mostly from the current income, and not from their accumulated savings or loans,” Nabiullina said. “But households have started to save less.”

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