MOSCOW, April 24 (Reuters) – Russian Central Bank Governor Elvira Nabiullina addressed a press conference on Friday after the central bank cut its key rate by 50 basis points to 14.5%.
Nabiullina spoke in Russian. The quotes below were translated into English by Reuters.
ON THE KEY RATE DECISION
“Two options were discussed: keeping the rate unchanged and cutting it by half a percentage point. Those in favour of keeping the rate unchanged pointed out that the core inflation rate in our country has not fallen since the middle of last year and has remained at 4–5%, and that more convincing evidence of a decline in core inflation is needed. They also drew attention, of course, to the increased inflationary risks.”
*ON THE REDUCTION IN ROOM FOR RATE CUTS
“As for the narrowing of the key rate range, as I have already said, inflation is, in our assessment, at the upper end of the forecast range. And yes, all other things being equal, this probably means less room for a rate cut.”
ON FOREIGN CURRENCY EXCHANGE PURCHASES UNDER THE BUDGET RULE
“At current oil prices, it is possible to replenish the National Wealth Fund, which is positive for fiscal stability. We took into account that the Ministry of Finance had previously announced that it would not revise the (oil) cut-off price this year and would return to the budget rule. At the same time, it will take into account transactions deferred from previous months. Therefore, from the perspective of annual figures, this is neutral. It may only affect intra-year dynamics.”
ON THE OUTLOOK FOR A SOFT MONETARY POLICY AND THE ECONOMY
“In order to either cut the key rate more sharply or pursue a soft monetary policy, inflation would need to fall below target and there would need to be signs of a significant rise in unemployment; however, neither of these conditions currently exists. This is true not only in our forecasts, but also in those of analysts and the business sector.”
*ON BUDGETARY RISKS
“There is currently debate regarding possible changes to the budget parameters…The higher the budget expenditure and the larger the structural primary budget deficit, the tighter monetary policy will need to be. What does a higher structural primary budget deficit mean compared to what was planned? It means that more money will flow into the economy via the budgetary channel. This means that the scope for private lending is narrowing.
“We will take this into account, but as the parameters have not yet been announced and discussions are ongoing, we recognise that this risk exists. It is there, and it has increased. I would also like to say that we are probably less confident now about the budget’s contribution to disinflation, as envisaged in the Budget Act.”
(Reporting by Darya Korsunskaya; Compiled by Lucy Papachristou)
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