20 May 2022 17:45

Process of restructuring Russia's economy could continue beyond 2024 - Central Bank

ST. PETERSBURG. May 20 (Interfax) - The process of restructuring the Russian economy could continue beyond 2024, but the main changes will happen in the next year or year and a half, Kirill Tremasov, the Russian Central Bank's director of monetary policy, said at the Conference of Institutional Investors in St. Petersburg.

"Sanctions restrictions have launched the process of a massive structural reorganization of the Russian economy, which could stretch out for the entire three-year forecast period [2022-2024] and even beyond it, but the main changes will nevertheless take place, it appears, in the next year to year and a half," Tremasov said.

Monetary policy under such conditions is a search for a fine balance between not hindering the restructuring process while also not allowing losses of macroeconomic stability, increases in inflation risks, or an inflationary spiral, he said.

The conditions in the Russian economy have changed amid the imposition of restrictions on the movement of capital, the start of a massive transformation of the economy in response to sanctions, and heightened uncertainty of external conditions, Tremasov said.

The monetary policy transmission mechanism has undergone changes as a result of the changed conditions, a transfer of momentum from changes in the key rate to aggregate demand and through it to inflation, Tremasov said. The transmission mechanism's currency channel has become less significant; the key rate has less influence on forex rates now and is more drawn out in time. The interest rate channel is continuing to work, but could require a stronger reaction from monetary policy, he said.