The Bank of Russia may move to a moderately tight monetary policy (MP) to bring inflation back to its target of 4%, the chairman of the regulator Elvira Nabiullina said during a press conference.
“We do not rule out a transition to a moderately tough policy. We did not rule out before, but the likelihood, in our opinion, has increased now, although this is not inevitable. Everything will depend on the dynamics of the economy and inflation, inflationary expectations, ”she said.
With a neutral monetary policy, the key rate in Russia should be 5-6%. At the same time, according to Nabiullina, in a situation where inflation in the country is high, the short-term neutral rate may be higher.
Nabiullina noted that now the Central Bank sees the need to further increase the key rate at future meetings.
Today, the regulator has increased the indicator by 0.5 percentage points for the second time in a row. Now the rate is 5.5% per annum, that is, it has returned to the level of June last year. The head of the regulator stressed that it is very likely that at the meeting on July 23 the key rate will be increased again. At the same time, she added that it is impossible to exclude the possibility of maintaining the indicator at the current level, “because in our life, which is much richer than forecasts, various unforeseen circumstances may occur.”
The head of the Central Bank explained that the board of directors will make the decisions necessary to bring inflation back to the 4% target. According to Rosstat, in May the annual consumer price index reached a new five-year high of 6.02%. How much the regulator will raise the rate depends on inflation and inflationary expectations of the population. While the Central Bank does not see a stable downward trend in the latter, they remain at an increased level for more than six months.
Nabiullina added that the Central Bank is likely to revise the inflation forecast for 2021 upwards. Now it is 4.7-5.2%. The head of the regulator expressed the opinion that the rate of growth of prices in Russia will begin to slow down in the fall.
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