Central Bank has called the reasons for lowering the key rate – RBC

Photo: Yekaterina Kuzmina / RBC

CB first reduced the key interest rate since last summer. His decision, he explained to the stabilization of inflation, lower inflation expectations and risks, as well as the prospect of economic recovery

The first factor that marked the Central Bank in a press release to reduce the key rate, it is confidence in a steady decline in inflation. “The pace of consumer price growth was lower than forecast. Annual inflation stabilized at 7.3%, monthly inflation in seasonally adjusted annualized terms – about 5% “, – stated in the message. The improvement in economic activity is no pressure on consumer prices, and inflation expectations of the population and businesses continue to decline, CB adds.

It is better than expected, and the situation on world commodity markets, adds the Central Bank. This has contributed to the reduction of inflation through the dynamics of the ruble exchange rate and food prices. Another positive factor for inflation – regulated prices and tariffs will be indexed in July, not so much as a year ago

«In the future consumer price inflation will continue to decline, primarily under the influence of constraints on the demand side.. The Bank of Russia lowered the inflation forecast for the end of 2016 to 5-6%, “- indicates the Central Bank

Another important factor to take into account the Central Bank in its release, -. Positive trends in the economy are not accompanied by an increase in inflationary pressures . “The data on the dynamics of GDP in the first quarter of 2016, as well as macro-economic indicators for April confirm the increase in the stability of the Russian economy to oil price fluctuations. Ongoing development of import substitution and expansion of non-oil exports processes, there have been additional areas of growth in industrial production “, – lists of the Central Bank. However, there remains the negative dynamics of investment, stagnating at a rather wide range of industries, including those that have traditionally been sources of growth of the Russian economy. “However, the positive developments in the economy is approaching its entry into the recovery phase: the quarterly GDP growth is expected no later than the second half of this year”, – said in a statement. Central Bank forecasts GDP growth of 1.3% in 2017 with an average annual oil price of around $ 40 per barrel in the next three years.

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Monetary conditions remain moderately hard, the Central Bank said. Real interest rates in the economy (taking into account inflation expectations) remain at a level that will encourage savings and ensure demand for credit, does not lead to an increase in inflationary pressures. To continue to monitor interest rates in the economy during the transition to the surplus liquidity in the banking sector, the Central Bank is ready to use “the necessary set of tools aimed at absorbing liquidity,” the report says.

As noted by the Bank of Russia, the risks that inflation will not reach the target level of 4% in 2017, declined, but remain at an elevated level. “This is mainly due to the inertia of inflation expectations, the lack of medium-term fiscal consolidation strategy, the uncertainty of future indexation of salaries and pensions of parameters” – indicates the Central Bank. The negative impact on inflation expectations can have a volatility in the oil and financial markets. Realization of these risks could result in slowing down the process of reducing inflation, the Central Bank sums up.

On Friday, the Bank of Russia cut its key rate by 0.5 percentage points to 10.5%. This was the first time since the summer of 2015.