UPDATE2: Cbank chairwoman warns against high crude price euphoria

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MOSCOW, Jan 17 (PRIME) -- There is still uncertainty on the global crude market and one should not yield to the high price euphoria, Central Bank Chairwoman Elvira Nabiullina said at the Gaidar Forum on Wednesday.

On January 11, the Brent oil price broke through a U.S. $70 per barrel mark for the first time since December 2014.

“We should nonetheless be very cautious about financial stability risks and oil prices. Now there is a certain extent of euphoria from high crude prices, but we all understand that there was and there is uncertainly on the market,” she said.

Russia’s economy is still very dependent on oil prices although it is now less vulnerable to their fluctuations, Nabiullina said and added that the share of energy income has fallen to 40% from more than 50% in the budget. It has also dropped in the export structure, but is still significant in gross domestic product GDP).

The ruble to crude prices dependency ratio has decreased 7 times since the beginning of 2015 to 0.13, but it is still insufficient for diversification of the economy, the official said.

“This is a result of introduction of the floating currency rate and adaptation of economic bodies to the rate. Besides, I would like to stress the importance of the budget rule policy.”

The chairwoman also said that the central bank expected Russia’s post-crisis recovery to finish until the end of 2017 and it did. GDP reached “roughly the level the central bank projected.”

Nabiullina said that the central bank sees the inflation target of 4% as correct and does not plan to adjust it.

“Some people suggested that we should adjust the inflation target to 2%, the level developed countries have. We do not agree. We believe 4% is a correct level for Russia’s economy, which is to diversify and to go through structural changes,” she said.

“The benefit of low inflation is its predictability. The business, people will begin to trust that inflation will stay at the level.”

Nabiullina said that the central bank is against a rapid cancellation of currency regulations as the country’s capital flows systems bases on it. New mechanisms to monitor shady operations need to be implemented, and it is only then that currency controls may be abolished.

The chairwoman also said that the central bank plans to privatize three large banks it currently owns under bailing-out procedures as soon as possible.

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