Nabiullina acknowledged the current high inflation – RBC

the head of the Bank of Russia Elvira Nabiullina

Photo: Alexei Danichev/RIA Novosti

the head of the Bank of Russia Elvira Nabiullina acknowledged that the transition to a new model of the economy. However, investment is only possible with low inflation, 4%

the head of the Bank of Russia Elvira Nabiullina believes the current high inflation and investment inflation rate — the indicator of 4%.

“Now the usual inflation of 6-7%, there are wishes: it’s time to cut rates, inflation has returned to normal. But 6-7% was more or less normal inflation in the mid-2000s years with the steady increase in oil prices”, — said the head of the Central Bank, speaking at the forum “Russia calling!” organized by “VTB Capital”.

According to her, Russia needs a different economic model, savings and investment. “There must be savings, which become investments”, — said the head of the Central Bank. Signs of recovery in consumption recorded by the Bank of Russia should not exceed the growth of nominal incomes, said Elvira.

According to her, the Central Bank should continue to encourage savings activity. For this purpose the regulator plans to maintain positive real rates by a few percentage points above inflation. “Our calculations show that the equilibrium level of interest rates should be 2.5–3% but with inflation of 4%,” — said Nabiullina. Only in this case, in her opinion, the level of the key rate can drop to 6-7%.

At the meeting of the Board of Directors on 16 September the Bank of Russia decided to reduce the key rate from 10.5% to 10%. Later Nabiullina has said that he believes a further reduction in the key interest rate in 2016 is unlikely.

Speaking Wednesday at the forum, the head of the Central Bank said that increased domestic borrowing by the Ministry of Finance will have no impact on interest rates. “We welcome the fact that the Ministry of Finance now will change the proportion between the expenditure of the Reserve Fund and borrowings. Because we’ll have less to absorb (liquidity. the RBC)”, — said Nabiullina. According to her, increased domestic borrowing will affect the interest rate. “Because the Central Bank will have less to borrow. We do not see such risks”, she added.

In late September, Siluanov said about a possible increase in 2017 limit domestic and external borrowing to more than 1 trillion and $ 7 billion respectively.

the Bank of Russia plans to achieve annual inflation rate of 4% by the end of 2017. According to Rosstat, in September the figure was 6.4%. According to the forecast of the Central Bank, inflation by the end of 2016 will amount to 5.5–5.6 percent.