6 Jul 2023 19:26

Nabiullina: Russian Central Bank allows for hike in key rate; matter of analysis whether it would be one-off or start of cycle

ST. PETERSBURG. July 6 (Interfax) - The Central Bank of Russia (CBR) allows for hiking the key rate, though the regulator is still not prepared to say whether this would be a one-off occurrence or the start of a cycle to tighten monetary policy, as this would become known through analysis, Central Bank Governor Elvira Nabiullina said at a briefing during the Financial Congress of the Bank of Russia in St. Petersburg.

"We see that pro-inflationary risks are prevailing over disinflationary ones and they are even increasing. Of course, we admit the possibility of raising the rate, and whether it will be one-time, or there will be a whole cycle will depend on the development of the situation, which we will analyze," Nabiullina said.

"Now it is probably premature to predetermine this," she said.

Proinflationary risks have increased since the June meeting, including against the backdrop of the dynamics of the ruble exchange rate, the head of the Central Bank added. "But in July we will make a decision based on all factors. We will analyze the influence of not only one factor, but all factors in order to make a decision," she stressed.

The Central Bank is still ready to carry out foreign exchange interventions only in cases of financial stability risks.

"We are ready to interfere in the work of the foreign exchange market, and we have all the tools for this if we see risks to financial stability. It's not just that someone does not like this or that exchange rate if it develops under the influence of objective circumstances. One indicator of financial stability risks can be "when liquidity drops sharply in the foreign exchange market, for example, the supply of foreign currency decreases. In this situation, we consider it possible to enter the foreign exchange market with interventions, and we have tools for this," Nabiullina said. She recalled that there are currency swaps to smooth out short-term fluctuations.