Central Bank of Russia may consider rate cut in July, but there are no guarantees, this depends on data - Nabiullina

ST. PETERSBURG. July 3 (Interfax) - The Central Bank of Russia's board of directors will likely consider a key rate cut at its meeting in July, and discuss the size of such a step if current trends persist and no unforeseen events occur, but no decision is predetermined, Central Bank Governor Elvira Nabiullina said.

"We will make the decision at the board of directors meeting. By that time, we will have more data for analysis. We will assess current economic trends, inflation and inflation expectations - the full traditional set of factors that influence our decision-making. What are we seeing now? We're seeing a slowdown in inflation, particularly in its persistent components, and it's happening faster than we projected in our previous forecast. By the way, we will be updating our forecast in July, including possibly revising the inflation forecast and the key rate trajectory. So, if nothing unforeseen happens, and the trends currently in place continue, then with greater probability - if I can put it that way - we will be considering a rate cut. Most likely, the discussion will be about the size of the cut," Nabiullina said during a briefing at the Central Bank's Financial Congress.

The CBR will act very cautiously and based on incoming data, she said. "No decision is guaranteed, including that a rate cut will definitely happen. Everything will depend on the data we receive by then. I wouldn't make any forecasts now. That's what our meeting is for, we spend the whole week discussing the data, formulating a balanced decision, and adjusting forecasts," she said.

In response to a question about the impact of the key rate cut of 1 percentage point at the previous meeting on the economy, Nabiullina said, "We believe the impact is already there. It comes not just from the cut itself, but also from expectations of its future path. By the way, we can see this reflected in market rates - more so in deposits, and a bit later in loans. Overall, market rates have actually declined more than the 1 percentage point rate cut we implemented, at least since the start of the year," she said.

The 1 p.p. rate cut prevented a tightening of monetary conditions, she said. "If inflation is falling, inflation expectations are declining, and the nominal rate remains the same, then real monetary tightening can actually increase. When we say we plan to maintain tight monetary conditions for an extended period, this can happen even while the nominal rate is declining. We've already seen that inflation and inflation expectations are decreasing. Looking at expectations from households, businesses and financial instruments, overall, they've been easing slightly. So, maintaining the key rate at the previous meeting would have effectively resulted in some tightening of monetary conditions," she said.

The next board of directors meeting on the key rate is scheduled for July 25.