28 May 2018 14:04

No point in changing neutral rate bracket now - Central Bank First Deputy Governor Yudayeva

ST PETERSBURG. May 28 (Interfax) - The components of a neutral interest rate fall within the 6%-7% bracket in spite of recent fluctuations; there is no point in changing this bracket at the moment, the Central Bank's First Deputy Governor Ksenia Yudayeva said in an interview with Interfax on the sidelines of the St Petersburg International Economic Forum (SPIEF).

"These fluctuations of the components, included in the total overall assessment, which we have observed recently, have been up and down. They have, generally, fallen within this range so I think that there is no point in changing it at the moment. We will change it only if we see a much larger deviation, which falls outside of the bracket and which is interpreted as long-term. In addition, we will be able to conduct several additional reassessments when we analyze already gathered data on inflation and output and how they are behaving near the target," the first deputy governor said.

She said that the assessment of the neutral rate is a theoretical concept, based on a situation of balance, when inflation is at the 4% target, economic growth is around the potential 1.5%-2% and there are no shocks. "This is a theoretical concept which is only fleeting if it happens in real life," Yudayeva said.

The Central Bank is currently using components such as the concept of a global equilibrium interest rate, the difference in inflation and risk premiums in the assessment of the neutral interest rate.

The first deputy governor said that situations, when the key rate will go below the neutral rate and then return back up are a possibility.

The Central Bank's key rate is currently 7.25% per annum.