CBR head sees room to cut rate, but says timing and pace will depend on developments
MOSCOW. July 3 (Interfax) - There is still room to ease monetary policy even now, despite the Central Bank of Russia (CBR) hardening its rhetoric in June, but it is not yet clear when and to what degree it will be used, Central Bank chief Elvira Nabiullina said.
The CBR's next board meeting on monetary policy will be held on July 24 and it will be a key meeting, with the CBR publishing its medium-term macroeconomic forecast.
"We will update our forecast for the development of the situation in July taking into account the factors that exist. Prior to this we assumed that, yes, there is indeed room to lower the rate. In principle, it exists, room to lower the rate. Only the timing and pace at which we can lower the rate will depend on the development of the situation," Nabiullina said in an interview with Nailya Asker-Zade on the Vesti program on TV channel Rossiya 1.
The situation on the domestic fuel market is "of course, concerning," she said. "But we see that the government is now taking all necessary measures to stabilize the situation. We see this factor of the situation on the fuel market as temporary," Nabiullina said.
She said the CBR will assess possible secondary effects for inflation and if it does not see any the fuel factor will not affect its decision on the key rate.
"When I say secondary effects, this means that, seeing the situation on the fuel market, people will fear future growth of prices for a wide range of goods. And this will affect inflation. And if there are such secondary effects, then of course this will influence our decision on the key rate," Nabiullina said.
At its previous board meeting on June 19, the CBR cut the key rate by a more modest than expected 25 basis points to 14.25% instead of by 50 points, citing pro-inflationary risks from the fuel market and the factor of budget policy. This move, combined with a number of comments that were tough in tone in both its statement and at the press conference after the meeting was a major reason for the Russian stock market's extended recent slide.
