16 Feb 2024 16:50

There is room to lower key rate, but reduction to neutral level will be smooth - Nabiullina

MOSCOW. Feb 16 (Interfax) - There is room for the Central Bank of Russia to lower its key rate, Central Bank Governor Elvira Nabiullina said at a briefing, mentioning that most parties to the discussion expect a first reduction to take place in the second half of 2024.

"We do see room for a key rate reduction, but our forecast assumes that the key rate will be returning to the neutral range smoothly. The future path of the key rate will depend on the extent to which the nature and pace of disinflation processes will be in line with the objective to bring inflation back to the target by the end of the year," she said at a briefing following the Central Bank's decision to hold the key rate at 16%.

"As for room for rate reduction. There is some, but, in our view it will take place gradually, smoothly. And, by the way, lowering the nominal key interest rate - if inflation expectations decrease, we need to look at the real rate - this could also mean keeping monetary conditions tight. I discussed with colleagues when the first key rate cut might take place, opinions ranged quite widely, but most believed that this would most likely happen in the second half of this year," she said.

She said Friday's board meeting discussed two options: holding the rate or raising it. "We'll give our arguments in a summary of the discussion, which we'll publish in a week. Ultimately the consensus was to hold the rate," she said. The regulator plans to publish its new material, "Summary of the Key Rate Discussion," on February 27.