CBR to be careful about lowering interest rate to avoid upsetting "fragile" downward trend for inflation

MOSCOW. Dec 4 (Interfax) - The Central Bank of Russia (CBR) will be careful about lowering its key interest rate so as not to reverse the emerging downward trend for inflation, the director of the CBR's monetary policy department, Andrei Gangan said.

"We'll need a more gradual reduction of the key rate than we perhaps thought earlier. Right now the forecast for the average annual rate for next year assumes it will be in the range of 13-15%. This means, on one hand, that there is room to lower from the current levels [of 16.5%], but it also means that the Central Bank will move very cautiously, carefully so as, again, not to reverse the already fragile emerging trend of slowing prices," Gangan said at an information session on monetary policy in Perm.

He said possible decisions on the rate in December will be clear closer to the date of the CBR board meeting, which is scheduled for December 19.

"We will only know the options that will be discussed in the last week before the meeting on the rate, meaning the proposals that will be on the table will be voiced by the participants in the discussion," Gangan said when asked about the possibility of another rate cut in December.

"We have now already actively begun preparing for the round, analysing, launching our macroeconomic models, what happens in terms of various types of model trajectories, but final decisions and probabilities will be clear closer to the meeting itself," Gangan said.

The CBR cut the key rate by 50 basis points to 16.5% in October.