Central Bank ready to cut key rate once currently high inflationary expectations decline - Nabiullina
MOSCOW. Jan 21 (Interfax) - The Central Bank of Russia will be ready to reduce the key rate once a trend toward slowing inflation and lower inflationary expectations has been established, Central Bank Governor Elvira Nabiullina said in a statement released on Wednesday.
Earlier in the day, the newspaper Izvestia, citing sources, reported that the Central Bank would cut the key rate by 2-3 percentage points in Q1 2015, according to figures voiced at a meeting of the National Financial Council at the end of December 2014.
"The Central Bank's board of director made the decision on the key rate first and foremost based on the need to rein in inflation, which is the priority problem for the public and for business in the current situation. The Central Bank will be ready to lower the key rate given formation of a steady trend toward reduced inflation and inflationary expectations," Nabiullina said in the statement.
"Namely the abrupt acceleration of price increases, the spike in inflationary and devaluation expectations, compelled the Central Bank to radically increase the key rate in December, to 17%," she said.
"This decision made it possible to stabilize the situation on the currency market, but inflationary expectations remain high. The Central Bank board of directors will make a decision on January 30 concerning rates based on the estimate of inflationary risks, the current economic situation and the growth forecast," Nabiullina said.
Russia's partial embargo on food product imports and ruble devaluation helped to push inflation to 11.4% in 2014, nearly double the Central Bank's original forecast for the year. The last time Russia had double-digit inflation was in 2008, when consumer prices rose 13.3%.
Inflation has continued to accelerate this year, with prices rising 0.8% in January 1-12, pushing up the annualized rate to 11.9%.
The Economic Development Ministry said in an official forecast at the beginning of December that inflation would total 7.5% in 2015. Later, at the end of December, Economic Development Minister Alexei Ulyukayev said 2015 inflation would amount to 10%. Central Bank officials have said the regulator's goal is to reduce inflation to 8% by the end of the year.
Deputy Economic Development Minister Alexei Vedev said the annualized inflation rate would peak at 15%-17% in March-April but would return to single digits by year-end.