CBR notes slowing weekly inflation, sees possibility for gradual reduction in key rate - deputy head

MOSCOW. April 14 (Interfax) - The rate of price growth in Russia, although still significantly higher than the inflation target, is consistently slowing down, Central Bank of Russia (CBR) Deputy Governor Alexei Zabotkin said at a meeting of a State Duma working group.

He drew attention to the decrease in the rate of price growth from week to week. "Yes, 0.66% last week is still a very high increase in prices. What would be consistent with 4% inflation is 0.1% - 0.1% with kopecks per week. The rate of price growth is still very much higher than the inflation target, but it is consistently slowing down," Zabotkin said, noting that these trends are reminiscent of the inflation situation in 2015.

"This gives us an opportunity to begin a gradual reduction in the key rate. We lowered it by 3 percentage points on April 8. The speed of further rate cuts will be determined by further normalization of risks to financial stability, the forecast of economic development and the resulting inflation forecast," Zabotkin said.

He stressed that the degree of uncertainty is much higher than usual, especially in terms of changes in foreign trade," the CBR official said.

According to Zabotkin, the liquidity situation in Russia's banking sector has normalized, and the population has returned a significant part of the cash that it had withdrawn.

"As of today, the situation has completely returned to normal in terms of liquidity; a significant part of the cash withdrawn in rubles has already returned to banks; and the banking system has returned to a stable structural surplus [of liquidity]," Zabotkin said.

The deputy governor recalled that the structural liquidity shortage in the banking sector had reached 7 trillion rubles at its peak, with the Central Bank of Russia (CBR) providing funds totaling 10 trillion rubles.

Central Bank First Deputy Governor Ksenia Yudaeva noted that "nearly the annual rate of cash withdrawals" occurred on one of the days during the period of volatility.