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Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting 22 March 2019

22 March 2019

Today, the Bank of Russia Board of Directors decided to keep the key rate at 7.75% p.a.

We have every reason to believe that the decisions to raise the key rate made last year are most likely to be sufficient to bring annual inflation back to the near 4% target in the first half of 2020. Some indicators have performed better than we expected in December: foreign financial and commodity markets have stabilised, the VAT pass-through to prices is quite moderate, and inflation expectations have turned to decline. In these circumstances, inflation stands somewhat below our December forecast, while short-term proinflationary risks have softened.

Given these trends, we expect end-2019 inflation to come in at a lower level of 4.7-5.2% instead of the 5-5.5% range forecast earlier.

Let me set out in further detail the factors that were central to our decision.

First, as I have mentioned, annual inflation in January-February proved somewhat lower than we expected at the end of last year, In February, it came in at 5.2%. Monthly price growth rates have already been going down. Annual inflation will pass its peak in March-April on the back of the base effect. Our updated estimates suggest that at its highest point inflation may surge to approx. 5.5%. You will recall that in December we did not rule out that inflation might considerably exceed this level.

There are several reasons for such inflation dynamics.

First of all, the contribution of the VAT hike to annual inflation currently stands at approx. 0.6-0.7 pp, which is close to the lower bound of our expectations. According to our estimates, the VAT pass-through to prices has already largely materialised. This is suggested by the analysis of prices of goods and services for which the VAT was raised. These are mostly non-food goods and services. Annual price growth in most of them has accelerated only moderately. In monthly terms, it returned in February to the growth pace seen in September-December last year (seasonally adjusted); however, it still holds somewhat above 4% in annual terms. Weekly inflation estimates suggest similar developments. After a surge in the first two weeks of this year, they have dropped in recent weeks, though holding somewhat above the path that corresponds to our inflation target. Moreover, we do not rule out that the deferred effects of the VAT hike may manifest themselves in the months to come. It is also of note that in February, both monthly core inflation and most other indicators adjusted for volatile components and seasonality exceeded 4% in annual terms.

There is evidence that risks that prices of certain food products may grow at an elevated pace have decreased. In February, a decline was registered in prices of a number of products which had made a considerable contribution to acceleration of food inflation. Furthermore, both domestic and external prices of main crops stopped growing in recent months. Current harvest expectations for this year are favourable, which also limits risks in this part.

Petrol and diesel prices were comparatively stable in December-February, and even drifted down slightly in February. This constrained inflation acceleration. Furthermore, the ruble appreciated in the opening months of the year; this had a favourable effect on prices and inflation expectations.

 Inflation expectations is the second factor we closely monitor. We had concerns about their possible response to inflation acceleration. Expectations of professional analysts remain anchored. Analysts understand the temporary nature of this year's inflation acceleration associated with one-off factors, in particular, the VAT. Therefore, as the Bank of Russia, they forecast a moderate increase in inflation in 2019 and expect inflation to come in at 4% from next year onwards.

 Households and businesses responded to inflation acceleration more pronouncedly. Expectations of households rose from a historic low of 7.8% seen last April to 10.4% in January, that is returned to their mid-2017 readings. Businesses’ price expectations also jumped considerably. However, household inflation expectations dropped to 9.1% as early as March. Price expectations of businesses also declined. However, they both remain elevated. It is of special note that inflation expectations of households and businesses demonstrated last year that they remained unanchored. They follow current changes in prices, primarily petrol and food prices, and ruble exchange rate fluctuations.

 The third important factor we took into account is consumer demand. Lending underpins consumption but slowing wage growth constrains a rise in demand. Consumption growth slowed down after a short-term acceleration in November, which was likely associated with preemptive purchases of non-food goods in the run-up to the VAT hike. We can see it from retail sales figures. The rise in consumer activity does not exert pressure on prices. This, among other things, is an important reason of a moderate VAT pass-through to prices.

 The fourth factor is external conditions. A number of changes which only started to emerge in December, intensified at the beginning of this year. The US Fed and the European Central Bank eased their rhetoric as regards the monetary policy outlook. Improvements were seen in markets’ expectations regarding the negotiations of international trade restrictions. These factors supported emerging market currencies and reduced their risk premiums. We may say that external risks declined in this part. At the same time, geopolitical risks remain in place.

Oil prices in the first quarter were higher than projected in the baseline scenario. However, risks are high that oil production will exceed consumption this year.

Finally, overall monetary conditions have changed little if at all since the start of the year. Deposit rates have edged higher, while loan rates have stabilised. OFZ yields dipped on the back of improving conditions in global financial markets, as well as a result of reviewed expectations of market participants as to the future key rate path. These OFZ yield movements, while working to constrain the potential of loan and deposit rate growth, are laying the groundwork for their subsequent decrease.

With due account for the totality of factors I have mentioned, we have downgraded our inflation forecast for the end of this year to 4.7-5.2%. At this point in time, it is with a certain degree of confidence that we can say: provided that the situation unfolds according to our baseline scenario, the preventive steps we have made so far to increase the key rate last year are most likely to be sufficient to ensure annual inflation returns to 4% in the first half of 2020.

 I will now proceed to speak on the risks, as usual. Despite the reduction in short-term risks, the overall balance of medium-term risks remains tilted towards proinflationary ones. As before, we should approach the assessment of external conditions with great caution. The risks related to geopolitical factors remain high. We continue to observe manifold sources of uncertainly in the global economic outlook. Investor sentiment is subject to rapid change in this environment, which is set to impact on OFZ yields and the exchange rate. Certainly, elevated and unanchored inflation expectations, as I have said, also remain a material risk.

Moreover, it is premature at this stage to make a precise estimate for the ultimate impact of the VAT increase on prices and inflation expectations. At the present time, producers and retailers are essentially compromising part of their margins to ensure customer retention. The muted demand and competition for market share both work to prevent them quickly passing the tax change on to higher prices. This is why they proceed on a piecemeal basis, each time they are able to do so. Moreover, there are still stocks built up before the VAT hike. As contracts are renewed, goods taxable at the new rate will come into the market. Taking into account these factors, we do not rule out that the VAT change pass-through to prices could be protracted. Having said this, our baseline scenario suggests that the VAT pass-through to consumer prices is mostly complete.

As regards the main changes to our medium-term forecast, beginning from today, it will be published as part of the key rate press release. You have had the opportunity to read it.

The principal change in the forecast is a downward revision of inflation projections for this year. Furthermore, we have refined the average level of oil prices for this year based on their actual movements at the start of the year. The baseline scenario has been revised upwards from $55 to $60 a barrel; the high oil price scenario has been revised downwards from $75 to $70. Our oil price forecast for 2020-2021 remains unchanged. These adjustments have made no major impact on expected economic growth indicators in the context of the operating fiscal rule.

 Finalised data suggest GDP growth was 2.3% last year, above our expectations. Our estimates suggest that the accomplishment of major investment projects emerged as key enablers of this growth. With due regard for this, we, first, reconfirm our assessment of the nature of economic growth: the economy is close to its potential; its expansion does not create additional proinflationary pressure. Second, we keep our GDP growth estimate in the baseline scenario at 1.2-1.7% for this year. The growth rates will accelerate to 1.8-2.3% in 2020 and 2-3% in 2021 as the positive effect of national projects and structural reforms provided that these deliver.

The oil price adjustments in the forecast carry implications for balance of payments indicators. In the baseline scenario, the forecast current account balance for this year has been upgraded from $71 billion to $88 billion, chiefly on the back of a higher value of oil and gas exports. The balance of the financial account of the private sector has also been raised from with $20 billion to $35 billion. This is based on the actual data for the first two months of the year along with greater opportunities for the buildup of foreign assets given the higher export revenues. Over a medium-term horizon, balance of payments trends remain unchanged.

This year’s revision of the estimate for foreign currency reserves from $52 billion to $59 billion comes a result of higher foreign currency purchase volumes based on the fiscal rule in the context of higher oil prices.

 In conclusion, I would like to make the following comment. Should the situation unfold according to our baseline forecast, we hold open the prospect of a key rate reduction somewhat sooner than we assumed back in December last year. We do not rule out that this may occur in 2019. The Bank of Russia will make its key rate decisions, as it always does, taking into account inflation and economic dynamics against the forecast as well as risks posed by external conditions and the reaction of financial markets.

Q&A session for the media


Mrs Nabiullina, I will start with the last signal of the Bank of Russia. Can the Central Bank indicate the period more specifically [when conditions may arise for a reduction in the key rate. – Ed.]? Is it only about the second half of 2019, or is it also possible from April?

I also have a question regarding the signal of the Central Bank before the meeting. The Bank of Russia has already twice given no clear signals a week before the meeting. I would like to clarify: is this a special tactic or a set of circumstances?

One additional question about Eurobonds. Do you think the placement was successful? Also, is there technical readiness now, as well as the possibility of placing bonds in Chinese yuan? Thank you.


As for the period, we have indeed clarified our expectations with regard to the moment when conditions may arise for reducing the key rate. Previously, we talked about the end of 2019 and the beginning of 2020. We are now talking about 2019. We are not at the moment ready to give more specific data or more specific information on when this may happen. It will indeed depend on how the economy and inflation will develop – there are many uncertainties and risks, which I have mentioned. Therefore, everything will depend on how the situation will develop this year.

As for the signals before the meeting of the Board of Directors: it is usual practice for us not to give these signals. We give signals, and have given them several times when we considered it necessary to adjust market expectations a little, when we saw that market expectations seriously deviated from our own. Therefore, we had no special practice or special rule on giving signals before the Board of Directors meeting, and we are not going to return to this.

However, certainly, monetary policy issues between meetings of the Board of Directors with the participation of our specialists are discussed in different media. Therefore, undoubtedly, we share our thoughts with you on this topic, since we want to be fairly transparent and clear.

As for the placement of Eurobonds, it was successful indeed. Regarding placement in yuan, this is rather a question to the Ministry of Finance. Thank you.

QUESTION (Reuters):

Please advise whether the Board of Directors of the Bank of Russia considered a reduction in the rate among the possible options today? Or is it too early to think about this?

And the second question. Is the transition to the neutral rate possible in 2020? Or what are the new timelines for neutrality for you?


In fact, we considered one option at this meeting of the Board of Directors – to maintain the rate. As for the return to the neutral rate in 2020, yes, we consider it possible to return to it. Let me remind you that, according to our estimates, it is 6–7%. We believe that this is possible, but everything will depend on developments.

QUESTION (Russia 24 TV channel):

Mrs Nabiullina, a question about people’s federal government bonds mentioned by the Ministry of Finance: does the Central Bank have any instruments today to generate demand among the population? Thank you.


The Central Bank is responsible for the development of the financial market as a whole. We, no doubt, are interested in having all the instruments and institutions that allow financial market participants to invest in certain instruments, so that the population also has the opportunity to make savings and investments not only in bank deposits, but also for the people to be able to use all kinds of instruments.

Yet, probably, our main concern is that the population needs to be offered those instruments that the population understands. Therefore, we are preparing legislation on qualified and unqualified investors, because often people do not understand the complexity of some instruments and do not realise the risks that they take upon themselves.

From this point of view, we are creating such an infrastructure, but of course, people’s federal government bonds are also a matter of the Ministry of Finance, which issues government securities.

QUESTION (Interfax):

Mrs Nabiullina, you have improved the forecast for oil prices, and in essence, improved the forecast for inflation, but at the same time left the forecast for GDP at the same level. Is this related to the fact that you perhaps expect that the fixed assets provided for in the national projects will not go into the economy this year? What is the reason for leaving the forecast for GDP at the same level?

And the second question. In the answers to the bankers following the meeting in “Bor”, you said that in the event of increased sanctions and continued federal government bonds sales by non-residents, you will carry out intraday monitoring of bond sales. Accordingly, what will follow? Does this mean that in the event of some kind of shock you will redeem federal government bonds, or give recommendations to financial market participants?


We indeed left the forecast for GDP unchanged for this year, despite the adjustment of some parameters on the oil price. This is primarily due to the fiscal rule in force. The fiscal rule makes economic growth less dependent on fluctuations in oil prices.

We left such a forecast based on the following. We have previously expected, and now we expect exactly the same, that in the first half of the year there may be some slowdown in GDP growth rates. This is associated with an increase in VAT as well. However, at the same time, we presume that in the second half of the year there will be an increase in GDP growth rates. This will be connected with the fact that national projects will be more actively implemented, public expenditure and investment projects will also be implemented.

About intraday monitoring. Indeed, if there are risks to financial stability, we are ready to carry out more operational monitoring – intraday one – along with standard regular monitoring. Because during this period, volatility can be increased, there can be higher fluctuations.

What follows from this? It follows that we will apply the instruments that we have more accurately. We have a large set of instruments to act in conditions of risks to financial stability. By the way, speaking of the fact that we can enter the federal government bonds market and buy bonds, we have had this instrument for a long time already. In 2008 and 2014, we did not use it, and we do not think that we will definitely use it. However, we do not exclude that if circumstances develop in this way, we will need to use it; we always have it.

Nevertheless, we can use other instruments as well, including allowing our financial institutions (in order for them to have time to adapt to new conditions) not to re-assess the value of securities immediately. This measure worked in 2014, and we believe that it is more effective in this sense.

QUESTION (Vedomosti newspaper):

Mrs Nabiullina, the President recently instructed the Government and the Central Bank to reduce mortgage rates to 8%. At the same time, now the rates on long-term federal government bonds, in fact, are at the level of 8%. What is the action plan of the Central Bank in case the rates on long-term federal government bonds do not significantly decrease? Thank you.


Our calculations show that when 4% inflation is achieved, while reducing the risk premium, mortgage rates can be at around 8% or even lower. It is our task as the Central Bank to create macroeconomic conditions in order to make this possible. Our monetary policy, which aims to return inflation to 4%, acts to reduce mortgage rates.

Indeed, with the increase in inflation, we experienced a slight increase in mortgage rates. According to our estimates, since last summer they have grown by about 50 basis points. In principle, it is not that much. However, our actions to limit inflation, in our opinion, should lead to the fact that mortgage rates will stabilise at a minimum and may subsequently decline.

QUESTION (Mediazavod Information Agency, Chelyabinsk):

Is it possible to consider the impact of the growth of utility prices, which is recorded in the regions, despite restrictive measures against natural monopolies in this area, on inflation in Russia significant (including as a result of the reform of municipal solid waste management)?


Indeed, the growth of utility prices often used to be a significant element or factor that affects inflation. According to our estimates, this year, the dynamics of tariff increase allowed for will not lead to an increase in inflation. Yes, the schedule has changed a little: one increase in January related to the increase in VAT, the second increase in July. However, it gives even greater uniformity over the months in terms of monthly price growth rates.

Therefore, from the point of view of utility services in general, we do not see any kind of inflationary effect from the decisions that have been and are being made.

As for the tariffs for municipal solid waste disposal, there has indeed been a large increase in these tariffs. According to our estimates, in February the annual growth rate of the tariffs was 51%. There is a very large differentiation by region. There are regions where these tariffs even fell, there are regions where they grew substantially. In our CPI basket, these tariffs have a rather substantial share – 0.15%.

Therefore, according to our estimate, these tariffs affected inflation by about 0.07 percentage points. [contribution to annual inflation in February. – Ed.]. Obviously, this factor is not only and not so much an inflationary factor as a social one. We know that this issue is also the focus of attention of the Federal Antimonopoly Service and the municipalities, and we assume that in general there will be no big effect on the inflation index.

However, I will repeat once again, we see a very big difference among regions.

QUESTION (Kommersant newspaper):

I have two questions on the medium-term forecast. First: how often will it be issued? Will it be issued in such a format for each meeting on the key rate?

And the second question directly on this forecast. The model has a very low import forecast in two scenarios for 2019, with recovery later – from 2020–2021. What is the hypothesis of the Central Bank on import behaviour? Will the investment or consumer demand fall within this hypothesis?


As for the medium-term forecast, we will publish it when we clarify it, and we clarify it for pivotal meetings. Therefore, when there is a pivotal meeting, respectively, we update the forecast and publish it.

From the point of view of the clarifications that occurred for import, they are indeed related to the clarifications of the forecast for the balance of payments, because our adjustment of the oil price mainly affected the indicators of the balance of payments, and first of all the slowdown in investment import.


Mrs Nabiullina, does the regulator allow for a faster transition to the target than is stated now? And how can this affect the rate reduction policy, respectively?

And the second question: how do you assess the current sanction risks for the economy as a whole and for the banking sector? Thank you.


We are now assessing the transition to the target, to our goal of 4%, in the first half of 2020. Can this happen earlier – in fact, in 2019? According to our basic scenario, no, but, of course, there may be disinflationary factors, in our opinion, of a one-time nature. For example, rate appreciation and lower prices for food products – any kind of factors that can lead to disinflationary effects. We do not exclude that this may occur, but I would like to say that this is unlikely to affect our trajectory for the rate, because, most likely, these will be short-term factors.

With regard to the sanction risks. We proceed in the baseline scenario from the fact that sanctions are preserved, and we proceed from the fact that the sanctions risk itself, whether they will be strengthened or retained, is a factor of uncertainty that we take into account.

QUESTION (Bloomberg):

Could you please comment on the balance of payments, too? In the financial account, an inflow of 6 billion USD is now expected in the public administration sector, although there was an outflow of 1 billion USD. Do you expect an inflow in federal government bonds? What is the reason for this because you say that geopolitical risks persist?

And the second question. Money markets price in two rate reductions this year. Is it possible already from the third quarter?


First of all, I will comment on the rate reduction. I will just repeat the existing formula. The one that we admit the possibility of reducing the rate in 2019, without specifying when this may happen. This is our basic vision, if the situation develops in accordance with our baseline scenario.

As for the clarification of the financial account for the public administration sector and the Central Bank. This is, indeed, due to the fact that we estimate that about 2 billion USD will come to the federal government bonds market from non-residents, this is our estimate, and 4 billion USD are Eurobonds that have already occurred.

QUESTION (Bloomberg):

The investment climate in Russia has deteriorated. This is obviously demonstrated by the Calvey case. And the Central Bank, by the way, also revised the forecast data on capital outflows and, in fact, lowered the forecast for investment growth. In this regard, there is a question. You raised your outflow forecast and lowered your investment. Is this also connected with the deterioration of the investment climate, with the Calvey case? Thank you very much.


It has nothing to do with assessing or reassessing our investment climate. As for the outflow of capital, this, as I have said more than once, is a mirror image of the increase in the current account balance for us. We increased our estimate, our forecast for oil prices. Accordingly, this is reflected in the fact that we have increased our assessment of the current account surplus. This was also reflected in the outflow of capital [the balance of financial transactions of the private sector. – Ed.], which is not associated with the outflow of capital from the country.

Again. This [the balance of financial transactions of the private sector. – Ed.] can theoretically be either a decrease in foreign financial liabilities or an increase in financial assets. In the first two months, we already see that there is an increase in the financial assets of our companies and banks. Therefore, this is indeed a reflection [of the current account. – Ed.] of the balance of payments in the context of the fact that we changed the forecasted oil price when we have a floating exchange rate.

Of course, this also reflects where the current account surplus goes: either to the transactions of the private sector or the public sector, into the accumulation of foreign exchange reserves. Among other things, we have clarified the accumulation of foreign exchange reserves as well. I stress once again: due to the fact that oil prices have risen. And here we also take into account the fact of the first two months that have already passed. The same thing goes with regard to the investment assessment.

QUESTION (VL.RU Internet portal, Vladivostok):

The key rate was raised in September and December last year. Has the mega-regulator calculated how the interest rates on loans in commercial banks eventually changed? How much can the increased key rate affect the decrease in household lending and the decrease in the so-called debt load of households in the future?


Indeed, since the second half of the last year there has been an increase, a slight increase, let us say, of the rates on deposits and loans. By the way, not as a result of the increase in the key rate of the Central Bank, but due to the fact that inflation was rising. We saw that even before our increase in the key rate in September, some bank rates began to grow as a reaction to rising inflation, a reaction to higher federal government bond yields.

We see that credit and deposit rates responded, but rather moderately. I have already mentioned: the mortgage rate increased by 50 basis points from the summer. For household loans, this is somewhere around 60 basis points and for long-term business loans – about 70 basis points.

By the way, the increase for bank deposits is higher – 130 basis points. This largely helped to maintain the attractiveness of the savings of the population. Of course, in order for the loan rates to start falling, it is necessary for us to reduce inflation, stabilise it and maintain it at our target level.

As for household lending, it is growing at a fairly high rate. We have taken and are taking even a special set of measures in order to reduce the growth rate of lending, primarily with high interest rates, in order to restrain the growth of the debt load of the population. A part of these measures will begin operating from 1 April.

QUESTION (Channel One):

About a month ago, the Central Bank’s Information Security Department said that they were developing countermeasures to fraudsters who use a scheme to replace phone numbers when they call bank clients allegedly from a bank, although these are fraudsters calling, and the clients voluntarily give them practically all the information. And because they do it voluntarily, there were difficulties with the return of funds afterwards. A month ago, apparently, some work began; could you please advise whether you have invented something to deal with it? Thank you.


This question does not relate to the monetary policy, but it is an important one. For us, it is indeed important to reduce the likelihood of fraud in this market, especially with the development of new technologies, both mobile and digital.

Therefore, we are now working on a set of measures with the banks themselves. First of all, banks will have to pay attention to what additional mechanisms to include, so that this could be impossible. However, we will talk about specific things next time, if you do not mind.


What, in the Central Bank’s opinion, lies behind the strengthening of the ruble, which we have been observing since February, and how has it affected inflation? Thank you.


First of all, We believe that the pass-through of the exchange rate to inflation has existed and remains now as well – this ratio is 0.1%, that is, less than it was once, a few years ago. Since we have an asymmetrical pass-through coefficient, that is, when the exchange rate weakens, this affects inflation more than when the exchange rate strengthens, this affects the decrease in inflation to a lesser extent.

The ruble’s appreciation itself was due to foreign markets. There was a reassessment of the monetary policy trajectory of the largest countries. Accordingly, in principle, risk premiums for emerging market countries have decreased slightly. This has led to an increase in the attractiveness of emerging market economies for investors. And we also felt it on ourselves. This is primarily the effect of softening of the rhetoric of the US Fed and the ECB.

QUESTION (Interfax):

Did the Bank of Russia and VEB agree on the fate of the loan in the amount of 212 billion rubles granted to Vnesheconombank for the rehabilitation of Svyaz-Bank and Globex Bank? VEB says they do not need compensation for Svyaz-Bank, let us solve the problem with this debt.


Negotiations are underway at the moment. We have not completed them. However, negotiations are underway.

QUESTION (Reuters):

I would also like to clarify the question about the ruble. You have revised oil price forecasts. At the same time, you say that the ruble's appreciation has somewhat limited inflation. Can we say that the ruble exchange rate at the present time is determined more by the inflow of foreign funds into federal government bonds, rather than by oil prices? Thank you.


Well, look. Since the beginning of the year, the ruble has strengthened by around 9%, maybe a little lower. We estimate expertly that somewhere between 2–3% of this 9% is the effect of the oil price. The rest is the effect of movement on the capital account as a whole, including the interest of non-residents in federal government bonds, and other factors. However, indeed, the effect of oil prices is less than the effect of capital account transactions.


Mrs Nabiullina, the reduction of the acquiring fee in several areas is actively being discussed now. There are also proposals to cancel the acquiring fee for merchant acquirers. What do you think? How realistic is this?


First of all, our position is that there should be no administrative and state regulation of these tariffs. We believe that they should be regulated by the market. Well, at least on the basis of agreements reached between banks, payment systems and, accordingly, participants of the retail trade. Such negotiations are underway. Part of the agreements have been reached. The Central Bank here arranges such a discussion. These agreements are about a number of types of goods and services. For the moment, representatives of retail chains believe that this is not enough. However, we agreed to continue negotiations.

Here it is very important for us to keep some balance. Firstly, we see that a decrease in these tariffs can most likely only lead to a redistribution of income between banks and retail chains and is unlikely to affect the final consumer. We would like to see whether this will ultimately affect the final consumer, the availability of goods and services for it. For the moment, we do not see it.

And secondly. We should not under any circumstances discourage banks from developing the entire infrastructure related to non-cash payments, because over the past few years we have seen a really serious increase in non-cash payments.

I think everyone benefits from the fact that our economy is becoming more cashless and less cash-based, so to speak. Cash funds are less used. It is undoubtedly very important to maintain and strengthen this trend. It is also important that banks have the motivation to develop the sector of non-cash payments.

Therefore, the question of where to cancel or reduce rates to zero and where which interest rates should be, in fact, should be decided during negotiations by banks and retail chains. In our opinion, the Central Bank here should not dictate and regulate anything.

QUESTION (Izvestia ICC):

A few days ago, the website of the Central Bank published information on the sectors of the economy where most of the suspicious transactions are conducted. The leaders in this indicator were construction, services and production.

Could you please comment on this information? Thank you.


I think the monetary policy questions are over. Nevertheless, this is a really important question of our policy. We are taking measures to reduce the use of financial sources of unknown origin – those that serve the criminal economy, shady incomes. We periodically analyse where, in which sectors, such settlements and such revenues are most concentrated now, in order to draw our attention and attention of the banks to them. We work through financial institutions so that financial institutions pay attention precisely to such sectors. This comes from a risk-based approach. We see where these risks are, in which sectors, and, accordingly, we work with the financial sector in order to reduce the circulation in the economy of illegal income and financial flows of unknown and doubtful origins.

QUESTION (Izvestia newspaper):

We were recently visited by business ombudsman Titov. He lamented that we have a very high rate, since inflation is still 5.2%, and the rate is 7.75%. At the same time, the business is in a very poor position, and the return on assets is at a historically low level – 6%. And business believes that the lag is too high between inflation and the rate.

What could you answer to the business community representative? It would be interesting. Thank you.


Indeed, many companies complain that credit is unavailable. Although in general, we see that lending to the economy is growing. Our lending growth rates are generally good and outpace GDP growth rates.

The structure of this lending is important, of course. We therefore introduce incentive regulation, we are going to introduce it and develop.

As for very high rates. The level of rates is now increasingly associated with the key rate. However, I would like to draw attention to a more fundamental link of the rates in the economy with inflation, and not with the key rate.

Remember: a few years ago the key rate was low, and the rates were about the same. Why? Because there was high inflation. Economic entities respond primarily to inflation. Artificial reduction of the key rate will not lead to lower rates in the economy. Everyone should understand it well.

The main way to reduce interest rates in the economy, the availability of credit, is to reduce inflation. Stable low inflation will make loans more accessible, including long-term loans, which are necessary for the development of the economy.

By the way, we see this in terms of the dynamics of mortgage rates. These are long-term loans. They have become more accessible to the public. Their high growth rates are directly connected with and are happening against the background of a decrease in inflation.

Yes, many people compare the rate with profitability. Projects are different. By the way, we need to increase the profitability of companies. The Government is working on it. Because our labour productivity is not very high, which actually one of the reasons of low profitability. And the restructuring of production, which should lead to an increase in competitiveness, production efficiency, increase in profitability, are also a very important component of this equation.

Therefore, our policy coincides with the wish of the business to make rates more affordable. However, we believe that this can be done only by reducing inflation and [implementing. – Ed.] the corresponding monetary policy, which leads to a decrease in inflation.