Inflation in Russia has already peaked, but its decline is not yet sufficient for the Russian central bank to start cutting interest rates. Reuters reports that Russian Central Bank Governor Elvira Nabiullina said this today in a speech to members of the State Duma, Russia’s lower house of parliament.
Fighting inflation
The central bank raised its key interest rate by a total of 8.5 percentage points in the second half of last year to fight inflation. According to a Reuters poll, analysts expect the bank to leave interest rates unchanged at 16 percent this month, as it did at the previous two meetings.
Inflation in Russia fell to 7.4 percent last year from 11.9 percent the previous year. “If we had not raised the base rate, inflation would have been much higher than 7.4 percent last year,” Nabiullina said. “Moreover, it would have continued to accelerate even now,” she added.
Nabiullina said the central bank would start cutting interest rates as soon as it was convinced that “the slowdown in inflation has reached the desired speed.” However, the governor did not specify what that speed is, Reuters reports.
Target
The Russian central bank’s official inflation target is four percent. According to a Reuters poll, analysts expect the Russian central bank’s key interest rate to be 12.5 percent at the end of this year.
Lower interest rates usually boost economic growth because they lead to more interest in borrowing. However, Nabiullina pointed out that domestic demand is now largely supported by budgetary policy. The Russian government has recently significantly increased spending in the wake of the war in Ukraine, Reuters reports.
source: čtk
