Raising inflation target will harm economy, Central Bank of Russia thinking of lowering it but the time hasn't yet come - Nabiullina

MOSCOW. May 20 (Interfax) - Raising the inflation target from the current 4% would harm the economy and the Bank of Russia is thinking more about lowering it, but the right moment has not yet come, CBR Governor Elvira Nabiullina said.

"Starting from 2023, we can see that inflation has been growing not due to structural changes but due to overheated demand. Demand has been systematically exceeding supply capability. That's why we don't currently see any grounds for listening to those who suggest raising the target, as it will only cause harm to the economy," Nabiullina said at the Alfa Summit organized by Alfa-Bank.

She said the monetary policy review conducted in 2023 had indicated that there were grounds for lowering the target. "Our experts' models show that what we most likely need for the prosperity and development of our country is a lower inflation target. Of course we cannot make this change in the current conditions, but if we are going to change the target at all, it will be to lower it," Nabiullina said.

The CBR said in the draft state monetary policy guidelines that it was keeping the inflation target at 4%, but would discuss lowering it once inflation stabilizes around this level. The bank also said that it would not be possible to lower the target before 2028.

Nabiullina said that almost all emerging countries had an inflation target lower than 4%. "Our country has one of the highest targeted inflation rates. When you have a high inflation target, domestic prices change a lot more," she said.

She also said that constantly changing the inflation target and adjusting it to fit current circumstances could lead to lower levels of trust in Central Bank policies.