UPDATE: Executive: Cbank to keep cutting key rate, if inflation stable

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MOSCOW, Dec 1 (PRIME) -- The central bank will gradually reduce the key interest rate if there are no serious external shocks shifting inflation from a target level of 4%, Andrei Lipin, deputy director of the monetary policy department, said at a forum on Friday.

“The central bank is watching how the situation develops, we look at inflation expectations, we look at the dynamics projected for 2018, at what will happen in terms of external shocks… and we see a room for (the key rate) reduction if it does not influence the inflation target,” he said.

The central bank’s board of directors will next meet on December 15 to discuss the key rate last time this year.

Alexander Morozov, director of the reseasrch and forecast department, said that inflation may return to the target level of 4% in 2018 or 2019.

“It is difficult to project because a good harvest has become a surprise for both us and the Agriculture Ministry… this is a good harvest effect, low food prices dynamics. If we have a similar situation next year, it will keep prices down. If the situation worsens due to a worse harvest (we can expect) higher food inflation,” he said.

“As food prices are very volatile by default, we should better take into account more stable inflation markers…But it does not mean that inflation will accelerate strongly enough to grow above 4%.”

Economic Development Minister Maxim Oreshkin said in November that Russia’s inflation will slow down to 2.4-2.5% in 2017.

Morozov also said that although the central bank sees that inflation expectations are decreasing, they may rise temporarily in the next 6-12 months.

“A temporary advance in inflation expectations is possible indeed. This will not necessarily happen, but it is possible. Generally, we can see a downward trend,” he said.

According to the central bank, Russians’ inflation expectations dropped to an all-time low of 8.7% in November.

(58.5814 rubles – U.S. $1)

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