15 Jun 2018 16:33

Rate hike in 2018 not foreseen in baseline scenario - Nabiullina

MOSCOW. June 15 (Interfax) - The Central Bank's baseline scenario for monetary policy does not foresee a hike in the key rate in 2018, but an increase cannot be ruled out if pro-inflationary risks strengthen, Central Bank Governor Elvira Nabiullina said.

"Our baseline scenario contains no demand for raising the key rate. Nonetheless, if there is a combination of factors that lead to abrupt strengthening of pro-inflationary risks, we of course do not rule this out, because our main goal is to bring about the stabilization of inflation at the 4% level," Nabiullina said.

The somewhat tight monetary policy that is still being maintained should be sufficient, she said, but the Central Bank does not rule out other scenarios if the need arises.

Nabiullina said that raising VAT is a one-off factor and should have a one-off price increase effect. But as inflation expectations in Russia have not been anchored, in other words, there is a high likelihood of secondary effects and prices increases spreading to other goods, in addition to those for which prices will rise.

"If inflation expectations had been anchored and all market participants acted on the basis that this was a one-off factor, inflation rises and then stabilizes, there would be no necessary influence on monetary policy measures in principle. But as inflation expectations in Russia are not anchored, at this stage we must loosen policy slower than we expected before this," the Central Bank governor said.

According to preliminary Central Bank estimates, the inflation effect of raising VAT from 18% to 20% will be around 1 percentage point. The effect may be partially felt this year.