neutral rate estimate revised from 5-6% to 5.5-6.5% – Kommersant
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Head of the Central Bank Elvira Nabiullina during press conferences following the meeting of the Board of Directors on July 21, she announced that the assessment of the neutral rate was revised from 5-6% to 5.5-6.5%.
“The updated forecast takes into account the revision of our estimate of the neutral rate – up by 0.5 percentage points, to 1.5-2.5% in real terms or 5.5-6.5% in nominal terms,” she said. According to Ms. Nabiullina, today’s rate hike may be enough, but the scenario of further tightening of monetary policy is more likely. The head of the Central Bank clarified that the increase in the estimate of the neutral rate is associated with an increase in the risk premium for the Russian market and an increase in the external neutral rate.
The neutral rate is a term that defines the level from which the Central Bank counts the “softness” or “toughness” of its monetary policy. With its official change, all movements of the real key rate will be one way or another not rigid, but tied to this level.
Today, July 21, the Central Bank raised the key rate to 8.5% for the first time since September 2022. The Bank of Russia admits the possibility of a further increase in the key rate at the next meetings, the Central Bank said.
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