INTERVIEW: Official: Cbank dept to suggest bank cut rate on Mar 23

MOSCOW, Mar 16 (PRIME) -- The monetary and credit policy department of the central bank wants the regulator to cut the key rate at a meeting on March 23 from the current 7.5%, Director of the department Igor Dmitriyev told PRIME in an interview released on Friday.

“Taking the calculations and scenarios which the monetary and credit policy department is preparing and revising as a basis, we will suggest the board of directors consider reduction of the key rate. The scope of the rate reduction will be discussed at the board meeting, which, I remind you, will have the final say,” Dmitriyev said.

He said that the market expects the central bank to slash the rate at the next meeting. The central bank is not too slow in cutting it as economic growth is close to the potential.

The central bank will revise its forecast for all macroeconomic figures, but only slightly, Dmitriyev said. “There will be adjustments, they will concern all figures: the gross domestic product (GDP), inflation, the lending growth, GDP breakdown, but these will be small adjustments rather than a significant revision.”

He said that inflation is forecast to be a little lower on the year in April–June due to the base effect. Inflation will grow close to 4% in July–December. In general, inflation is close to the 4% central bank’s target. According to Dmitriyev, prices can fall in August but a possibility of a stable deflation is extremely low.

In February, inflation was 2.2%, as well as in January.

The central bank sees the effective interest rate significantly below 5%, Dmitriyev said. “The effective rate must be calculated by subtracting inflationary expectations from the key rate, most of all when they are volatile. They have fallen much now but are still significant. Households’ inflationary expectations amounted to 8.4% in February. Inflationary expectations of business are lower but still high. Only analysts’ expectations of analysts have stabilized at a low level.”

Reduction of inflation expectations will take years, he said.

Dmitriyev said that ruble stability has significantly strengthened due to the policies of the central bank. The ruble rate influences prices by about 0.1 percentage points.

The date of central bank’s launch of a neutral instead of a strict monetary policy is unknown so far but the board of directors is forecasting the step in 2018, the official said. After the move, the key rate may change both upwards and downwards depending on the factors influencing inflation.

The authority has no plans for additional operations to raise the reserves beyond U.S. $500 billion, he said.

He separately said that a large-scale purge of the banking sector by the central bank does not influence the monetary and credit policies. The central bank fully neutralizes the effect of its bailout actions on liquidity.

A liquidity surplus in the banking sector is to remain in the foreseeable future, Dmitriyev said.

End