MOSCOW: Inflation in the coming quarters will be affected by new factors that have emerged in recent months. The economy needs time to adju...
MOSCOW: Inflation in the coming quarters will be affected by new factors that have emerged in recent months. The economy needs time to adjust to them, so sustainably achieving the inflation target will require a higher key rate trajectory than previously expected, Bank of Russia Governor Elvira Nabiullina said at a press conference following the regulator's board meeting. She also noted that it is unlikely anyone can predict the exact impact of new sanctions.
TASS has collected key statements of the Governor of the Bank of Russia.
On the key rate
"With the current balance of factors, sustainably achieving the inflation target will require a higher key rate trajectory than previously expected," the regulator’s Governor said.
The Central Bank is not ruling out either further reductions of the key rate or maintaining it at its upcoming meetings.
"A decision on the next rate cut will require additional evidence confirming that further progress can be made without the risk of persistent inflation rising above the target level in 2026."
On Friday, the Bank of Russia's Board of Directors considered three possible key rate decisions: maintaining the key rate, cutting it by 100 basis points (bps), and reducing it by 50 bps.
"There were many arguments for these decisions, but the differences in positions can probably be boiled down to the assessment of persistent inflation and the degree of concern about the scale of possible secondary effects from one-off inflationary factors," Nabiullina explained.
On inflation
The expected tax increase "will help reduce inflation in the medium term, but in the short term, it will result in a one-time price rise." Elevated inflationary pressure due to "temporary pro-inflationary factors" will persist until mid-2026, then begin to ease.
Sustained inflation will reach 4% in the second half of 2026, and in 2027 and beyond, annual inflation will remain within the Bank of Russia's target.
The Russian budget needs low inflation, "no less" than the population.
For the Central Bank, "it is crucial to continue reducing inflation."
On the national economy and impact of sanctions
The situation in the Russian economy is developing in line with the Central Bank's forecast: "Monetary conditions remain tight, creating the conditions for lower inflation."
The Russian economy will emerge from overheating in the first half of 2026: "Given its actual dynamics, we have lowered our GDP growth forecast for this year to 0.5-1%, with GDP growth accelerating in subsequent years." It's unlikely anyone can predict the exact impact of the new sanctions: "Much will depend on how we adapt to these sanctions," Nabiullina said.
The root of the problems in a number of economic sectors lies "in a completely different area than the key rate."
On ruble's strengthening and monetary policy
The ruble's strengthening is largely due to tight monetary policy, which "was also influenced by one-off factors."
"Additional caution" is needed in further monetary easing steps.
Currently, the monetary easing cycle continues: "It may occur intermittently, but you can see the rate trajectory we've set, and next year will see a continuation, albeit more cautious, of monetary policy easing."
On the excess profit tax for banks
The introduction of an excess profit tax for banks will negatively impact their ability to provide lending: "It is capital that makes it possible to increase and expand lending to the economy. Essentially, every ruble withdrawn from capital reduces lending potential by 10 rubles. It's arithmetic."
On long-term savings program and mortgages
The Central Bank is not detecting any unfair practices within the long-term savings program: "We haven't detected any mis-selling yet. Of course, we'll keep an eye on this, but I think older people are more aware and understand the need for long-term savings."
The housing market is "currently recovering."
"We see that the share of market mortgages is not very large, but even market mortgages have begun to grow with the easing of monetary conditions," the Bank of Russia Governor noted.
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