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MOSCOW (Reuters) -Russian Central Bank Governor Elvira Nabiullina and her deputy Alexei Zabotkin addressed a news conference on Friday after the central bank, as expected, kept its key interest rate on hold at 21%.
Nabiullina and Zabotkin spoke in Russian. The quotes below were translated into English by Reuters.
*NABIULLINA ON IMPACT OF ROUBLE APPRECIATION ON BUDGET
For the exchange rate to have a significant impact on something, it must be a stable trend. So far it is premature to talk about this in the exchange rate. As for the impact on the budget, we need to look at the cumulative effects on both revenues and expenditures. In fact, rouble appreciation, all other things being equal, is a disinflationary factor. If the rouble strengthens steadily, it may mean a softening of monetary policy and a reduction in interest expenses for the budget. Therefore, I think we should analyse different channels of influence for the budget.
*NABIULLINA ON RISKS OF INCREASING DEMAND FOR GOVERNMENT BONDS
So far, we do not see such risks. If there is such interest, it is not expressed on a large scale. We do not see any risks to financial stability in the growing demand for government bonds. Because we see that this demand in the primary market and in secondary exchange trading is being made by a wide range of participants. These include banks and institutional private investors. The interest is driven not only by geopolitical expectations, but also by the first signs of slowing inflation.
NABIULLINA ON NON-RESIDENTS’ INTEREST IN RUSSIAN ASSETS
We do not have reliable data that we could rely on to show the manifestation of this interest. Although this topic is being discussed quite widely. And, of course, there are objective reasons for such interest – differential rates, difference in yields when investing in Russian assets. But, of course, the realisation of this interest is hindered by restrictions on capital movement and sanctions. We will monitor this situation.
NABIULLINA ON ROUBLE VOLATILITY
The exchange rate affects inflation expectations. But inflation expectations do not automatically follow the exchange rate. We see that exchange rate volatility, unfortunately, now, due to sanctions restrictions, is higher than in 2022. And, of course, this is not a factor that would contribute to the reduction of inflation expectations. But what I want to emphasise is that the lower the inflation, the more stable the exchange rate. Therefore, if and when we achieve sustainable low inflation, it will also work to stabilise the exchange rate.
NABIULLINA ON RATE DECISION
A key rate cut was not discussed by the bank today. It will be possible to start cutting the rate only after we are sure that inflation is falling steadily and at a rate that will allow us to bring inflation back to 4% in 2026.
NABIULLINA ON FURTHER STEPS
We see a reduction in the current inflationary pressure, but it is under the influence of both sustainable and some one-off factors. We will have to make sure that inflation is steadily declining. If the pro-inflationary risks that we note are realised, we may need to raise the rate. Let me remind you that our average key rate range for 2025 is 19-22%.
(Reporting by Anastasia Lyrchikova in Moscow and Darya Korsunskaya in London; Editing by Mark Trevelyan)
