Nabiullina called the reduction of the key rate in the near future unlikely
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The probability of the Central Bank (CB) lowering the key rate at the next meetings is small, Elvira Nabiullina, chairman of the regulator, told reporters.
“Reducing the key rate at the next meetings is unlikely <...> We can cut the rate only when we see a steady decline in price growth,” – leads her words TASS.
Nabiullina recalled that the regulator raised the rate at an extraordinary meeting in August precisely because of the escalation of risks for inflation. At the same time, the Central Bank allows the rate hike this month to reach the 4% inflation target next year.
Against the backdrop of the weakening of the ruble, the Central Bank decided on August 15 to raise the key rate immediately by 3.5 percentage points to 12%. The regulator explained this decision by increasing inflationary pressure and inflationary expectations, which are under pressure from the dynamics of the exchange rate. The Central Bank said later that day that it does not rule out a further increase in the rate in the event of increased pro-inflationary risks – a scheduled meeting will be held on September 15.
Annual inflation in July was 4.3% after 3.25% in June. On a monthly basis, prices rose by 0.63%. According to the Central Bank’s forecast, annual inflation will continue to rise in the coming months amid growing price pressure, as well as the withdrawal from the calculation of low monthly growth rates in summer 2022. The Central Bank expects that inflation by the end of 2023 will be at the level of 5-6.5% per annum and will return to the target at the end of 2024.
After the rate increase and against the backdrop of news about a possible tightening of foreign exchange controls by the authorities, the ruble strengthened somewhat. As Vedomosti wrote earlier, at a meeting between President Vladimir Putin and members of the government and Nabiullina, it was decided not yet to set standards for the sale of foreign exchange earnings by exporters and not to impose restrictions on the movement of capital.
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