Russia's central bank governor on rates, inflation and the economy
They spoke in Russian and the quotes below were translated into English by Reuters.
NABIULLINA ON KEY RATE DECISION:
"During the discussion, options for reducing the rate were considered, the option of maintaining the rate was not considered. Options for reducing the rate by 100, 150 and 200 (basis points) were considered, but the options of 100 and 200 (basis points) were discussed in detail."
NABIULLINA ON FUTURE RATE DECISIONS:
"If you look at our forecast for the key rate, it suggests that by the end of the year, at individual meetings, reductions of 100, 150 and 200 basis points are possible, as well as pauses. Here everything will depend on the incoming data. But such a uniform trajectory of reduction may be possible with a more convincing picture of inflation stabilisation, inflation expectations at a low level and the absence of new inflation shocks. For now, we assume the possibility of various steps."
"We are on the path to returning inflation to target, but this path has not yet been completed. There are already initial results. They allowed us to reduce the key rate again today, smoothly adapting the degree of monetary policy tightness to reduce inflationary pressure."
"But returning to the target does not simply mean several months of current price growth near 4%. It implies a stable consolidation of inflation at a low level not only in actual data, but also in the perception of people and businesses."
"Monetary policy has ensured a downward reversal of inflation, and it must remain tight for as long as it takes to sustainably return inflation to 4% in 2026 and consolidate it near this level."
NABIULLINA ON INFLATION RISKS:
"In the aggregate, pro-inflationary risks continue to prevail. However, when making decisions, we also take into account disinflationary risks. The main one is a faster cooling of credit and demand than we expect in the baseline forecast."
"We will reduce the rate in such a way that a spike of inflation does not occur. But, of course, we are concerned about increased inflation expectations."
*ZABOTKIN ON INFLATION RISKS:
"The indications of caution in further decisions on the rate, which were voiced in the chairman's statement, are essentially a reference, among other things, to the fact that we, of course, will act with an eye on what is happening with inflation expectations. It cannot be otherwise"
NABIULLINA ON BUDGET:
"Budget policy remains an important input for our forecast. We assume that the budget rule will be followed this year and in the following years. If budget plans change, it may be necessary to adjust the key rate trajectory."
NABIULLINA ON ECONOMIC CONDITIONS:
"Compared to April, we have lowered our forecast for Russian oil prices to $55 per barrel this year and next. We have also slightly lowered our forecast for exports and the current account of the balance of payments for the next two years."
"At the same time, the rouble exchange rate is affected by flows not only on the current account, but also on the financial account of the balance of payments. High interest rates support the attractiveness of rouble assets compared to foreign ones for Russian citizens and companies. This, combined with more moderate demand for imports, ensures the stability of the rouble exchange rate, despite a slight reduction in exports."
*NABIULLINA ON BANK RECAPITALISATION AND BAD DEBTS:
"We do not see any need for recapitalisation of large banks due to the potential overhang of bad debts. The banking sector is profitable."
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