Russian Central Bank Governor Elvira Nabiullina addressed a news conference on Friday, along with her deputy Alexei Zabotkin, to discuss the central bank’s decision to keep its key rate at 21%. The meeting came as investors await further updates on inflation and interest rates.
Nabiullina stated that three options were considered: keeping the rate unchanged, increasing it to 22%, or raising it to 23%. She argued that slowing credit growth was a stronger signal from a forward-looking policy perspective, indicating that monetary tightness had been achieved. This could pave the way for future expansion, Nabiullina said.
The central bank also acknowledged signs of decline in demand for labor, citing it as a key factor in assessing production possibilities. However, this process will be uneven across industries and may affect the economy’s assessment and decision-making.
Nabiullina emphasized that interactions with the government remain unchanged, despite an increase in information exchange on economic developments. The central bank is also facing challenges from sanctions, particularly those imposed on the Moscow Exchange, which has led to difficulties in cross-border settlements for clients.
The governor acknowledged the impact of monetary policy, saying it aims to avoid overheating while preventing over-cooling. Nabiullina stressed that criticism of the tight monetary policy stance escalates during periods of high rates and rate hikes.
In response to concerns about inflation, Nabiullina expressed confidence in the effectiveness of the current key rate but noted that its primary goal is not to reduce inflation at any cost. Instead, it aims to slow down demand growth without preventing production capacity from building up.
Nabiullina also addressed the rouble’s exchange rate, stating that market forces should prevail and avoid government intervention. The central bank will continue to monitor currency exchanges but does not see current risks as significant enough to warrant interventions.
Overall, Nabiullina highlighted the ongoing challenges facing Russia’s economy due to sanctions and inflation concerns. However, she emphasized the central bank’s commitment to maintaining price stability while allowing the market to find its equilibrium on various economic indicators.
Source: https://www.reuters.com/business/finance/russias-nabiullina-rate-decision-rouble-monetary-policy-2024-12-20