MOSCOW: Russia’s Central Bank head Elvira Nabiullina, in an interview, said that bank is unlikely do a u-turn on cutting key interest rate as inflation is anticipated to subside to 4 percent mid-term.
In an attempt to revive economic growth, the Central Bank unexpectedly cut its key rate to 15 percent from 17 percent at the end of January. This caused fears it could further trigger inflation that now stands at 15 percent.
She said the bank will decide on future rate changes based on an analysis of the economy, and the forecast on the dynamics of inflation and risks to growth and financial stability.
“We have very moderate dynamics in the money supply data, that’s why we’re really expecting inflation to slow down in the 2nd, 3rd quarters, in the 2nd half of the year and into 2016,” she said. “That’s why there’s no reason to talk about the inevitability of a rate increase.”
At the same time Nabiullina admits that low oil prices and sanctions will lead to an economic contraction and expects it to be at around 3 to 4 percent in 2015.
It’s expected that economic contraction will affect the banking system, as banks will offer fewer loans and lending rates will be higher.
“However, there’s no systemic problem – stress tests show banks will get through in a stable condition,”said Nabiullina.
