21 Nov 2019 14:19

CBR still sees potential for monetary easing, IMF supports it

MOSCOW. Nov 21 (Interfax) - Central Bank Governor Elvira Nabiullina said in a speech in the State Duma that there is still potential for key rate decreases.

"We characterize our policy now as neutral. It's aimed, tentatively speaking, at keeping inflation at about 4%, because we've already gotten close to this goal, but we see that there's some potential for softening. Rates will continue to fall, and the main thing isn't just rate decreases, the main thing is that loans here are being prolonged, and that's needed for investments," Nabiullina said.

Credit is not the only source for increasing investments, but when banks and investors are both sure that inflation will remain at a controlled level for a long time, loan periods increase, she said.

"For that reason, we think it's necessary to pursue a neutral monetary policy for now, but we're pursuing a stimulating policy for banks, we adjust regulation in such a way that banks are interested in project financing - that is, new investment projects. They're interested in financing the development and expansion of production, not just mergers and acquisitions," Nabiullina said.

At the end of October, the CBR cut the key rate by 50 bps, to 6.5%. The next board meeting will take place on December 13.

The International Monetary Fund expressed support for the bank's approach to monetary easing in a statement published on Wednesday following a mission to Russia. The IMF said that if inflation remains below the target in 2020, as it expected to do, further rate cuts will be justified.