Russian cbank may not reach inflation target of 4% in 2017

WASHINGTON, Apr 14 (PRIME) -- Russia’s central bank sees risks in reaching the inflation target of 4% in 2017, so it is cautious in its policy, the regulator’s First Deputy Chairwoman Ksenia Yudayeva told reporters Thursday.

“We actually have a chance to have low inflation next year. On the other hand, we have big risks that are partially connected with external events, and we have internal risks and high inflationary expectations in the first place,” she said, adding that expectations of many professional analysts are based on high inflation.

“This is an obvious reason for us to be cautious in our policy as the central bank, so that we are able to reach our inflation goal.”

Transition to low inflation is one of the most important structural reforms in Russia, as this is one of basic conditions for long money to appear. “This is not the only one, but a necessary (condition),” she said.

The regulator also expects lower rates of banking loans following the bond market where this has already happened, but a cut of the key rate from 11% may reverse the trend of long-term loans becoming cheaper.

“The fact that inflation is falling and inflationary expectations are falling leads to a slight growth of volumes and of the share of long-term loans and bonds, and bond rates start to fall in the first place. The bond rates traditionally fall first and then banks follow with a cut of credit rates. The process has been launched,” she said.

But the bank pursues the goal of slashing long-term rates. “Sharp movements from the point of the interest rate’s management may reverse the situation. We may decrease the short-term rate, while long-term rates will grow. We should obviously avoid that,” she said.

The central bank said previously that annual inflation fell to 7.3% in March from 8.1% in February. Economic Development Minister Alexei Ulyukayev said earlier that Russia’s inflation may fall to less than 7% in 2016 from 12.9% in 2015.

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