The head of the Central Bank Elvira Nabiullina

© Alexander Shcherbak/TASS

MOSCOW, December 15. /TASS/. The Bank of Russia will reduce the key rate in 2018, with pauses, he said at a briefing the head of the regulator Elvira Nabiullina.

“There remains the possibility for some reduction in the key rate in the first half of next year. We will move gradually, probably with pauses, assessing the response of financial markets, domestic demand, consumer prices for previously adopted decision on the key rate,” she said.

The Board of Directors of the Bank of Russia on 15 December 2017 has decided to reduce the key rate from 8.25 to 7.75% per annum.

According to the head of the regulator, the decision to lower the key rate by 0.5 percentage points, to 7.75%, is in the gradual easing of monetary policy.

“We believe that a step of 0.5 p. p. is in the smooth easing of monetary policy. We said earlier that we assume and 0.5 PP and 0.25 PP, and pause . And when we now say we will continue to reduce gradually, we do see the potential of a decrease, we get closer to a neutral policy,” she said.

At the same time, by words Nabiullina, moderate hardness monetary policy of the Bank of Russia allows to respond to external shocks without having to raise rates.

“We take into account the possible influence of external factors. They can be different, including geopolitical. In the baseline forecast, we assume the immutability of the sanctions, but, of course, we take into account this possibility, we do assessments on how can affect certain limitations. From the point of view of monetary policy moderate hardness DCT allows us to respond to any external shocks of any nature, without resorting to raising rates,” she said.

The next meeting of the Board of Directors of the Bank of Russia, which will address the issue of the level of the key rate, scheduled for February 9, 2018.

Dynamics of inflation

According to the head of the Central Bank, inflation in Russia in the beginning of 2018 will fluctuate around the value of 3%, in the second half of the year will achieve the target of 4%.

“In the first months of 2018 inflation may hover around 3%. In the second half of the year inflation according to our estimate, close to 4% – as the influence of temporary factors this year will come to naught,” said she.

See also

The Central Bank raised the forecast on growth of credit to the economy of the Russian Federation in 2018-2019 to 8-11%

The Central Bank raised the forecast for net capital outflow from Russia in 2018 from $10 billion to $16 billion

Of the Central Bank in the baseline scenario, raised its forecast for price of oil in 2018 from $44 to $55 per barrel

CBR predicts growth of volumes of transactions of the Ministry of Finance in the foreign exchange market in 2018

According to Nabiullina, inflation expectations acquired “resistance and immunity to bursts of price conjuncture”. “Gradually, inflation expectations should be fully adjust to a new, fundamentally lower level. But how quickly will happen this process until the factor of uncertainty”, – said the head of the Central Bank.

She stressed that a key role in the significant slowing of inflation in Russia is played by the success of agriculture. “Annual growth for food products in November amounted to only 1.1%,” – said Nabiullina. According to her, a factor in high yields in 2017 will affect the annual inflation rate in the first half of 2018 and is gradually exhausted by the third quarter.

“Another factor, which was still to curb inflation, strengthen the ruble. It occurred mainly in the first half of this year. Its effect is almost fully reflected in the prices and will be fully exhausted in early 2018,” – said the head of the Bank of Russia.

She added that the process of capitalization of banks has a minimal impact on inflation and rates in the Russian economy.

“As for the impact of capitalization of banks on the macroeconomy, we conduct such assessments. Here, these estimates also remain the same – that the impact of this capital increase and inflation on rates is minimal. We see this effect now,” he assured Nabiullina.

The Bank of Russia in early December announced that decapitalize the Bank “FC Opening” 456,2 billion rubles in the framework of the implementation of measures to prevent its bankruptcy. At the end of August the Bank came under the control of the interim administration appointed by the management company, the Central Bank created a Fund consolidation of the banking sector (VCBS).

The GDP growth rate

The Bank of Russia forecasts the growth of Russian economy in 2018 in the range of 1.5-2%, said the head of the regulator.

“Our forecast for 2018 is 1.5-2%. The forecast for 2017 was 1,7-2,2%, but closer to the lower limit now. This year is hard to say, and for 2018, so we give a fork”, – said Nabiullina.

The Bank of Russia increased the forecast of growth of Russia’s GDP in 2018 compared to the previous base scenario in which the regulator had forecast GDP growth in the range of 1-1,5%, considering the extension of the agreement to limit oil production OPEC+.

Nabiullina also noted that in 2019 there will be a reduction in the rate of economic growth to 1-1. 5% followed by a return to 1.5-2% in 2020.