23 Jun 2022 17:42

Central Bank sees potential for cutting key rate further, will monitor inflation dynamics, expectations - Chistyukhin

CHEBOKSARY. June 23 (Interfax) - The Central Bank of Russia (CBR) sees the potential for cutting the key rate further, while monetary policy should assist in easing monetary conditions and providing a disinflationary effect, Central Bank First Deputy Governor Vladimir Chistyukhin said at the Cheboksary Economic Forum.

"The Bank of Russia as of today will evaluate the feasibility of lowering the key rate at the upcoming meetings. This suggests that we see further potential for cutting the rate, though we will have to look at how inflation and inflation expectations are developing," Chistyukhin said at the forum.

"Indeed, we have seen that inflation has been decelerating in recent weeks, though it should also be noted that the growth rate in prices for most goods in the consumer basket still exists although it has decreased somewhat. It exists, and inflation is clearly above the target of 4 %," Chistyukhin said.

The CBR's board of directors at its meeting on June 10 cut the key rate by 150 basis points to 9.5% per annum, preceded by three rate cuts of 300 bps each from 11% pa set on May 26, from 14% pa set on April 29, and from 17% pa set on April 8. The CBR raised the key rate sharply from 9.5% pa to 20% pa on February 28 in response to rising devaluation and inflation risks, and the regulator maintained the key rate at 20% pa in March.

"In order to cut the rate further, we must be certain that the monetary policy that we are pursuing, on the one hand, eases loan and credit conditions. This is very important. The worst occurrence would be to cut the key rate and not receive a reduction in interest rates on loans," Chistyukhin said.

"It is of course necessary that monetary policy nevertheless provides a disinflationary effect even while easing loan and credit terms and conditions," Chistyukhin said.

Chistyukhin recalled that the CBR has forecast inflation to return to the target of 4% in 2024. "In no way are we saying that we need to return to the 4% target this year; even for next year, we have set the range from 5% to 7%, though we plan for inflation possibly returning to 4% in 2024," he said.