Russian Central Bank sees scope for further interest rate cut
The Central Bank of Russia (BCR) considers that there is scope to continue cutting the interest rate thanks to the factors that contain inflation, said the head of the monetary entity, Elvira Nabiúlina, on Friday.
“Under conditions marked by a future prevalence of deflationary trends, the Bank of Russia has room to continue to soften its monetary and credit policy,” she said at a press conference.
At the end of April, the BCR reduced the interest rate by 50 basis points, to 5.5%, due to the negative impact of the coronavirus pandemic on economic activity.
The BCR governor pointed out that after the low levels of inflation in the summer and fall of 2019, annual inflation is likely to grow.
“However, we can affirm that the action of temporary factors favorable to inflation was less significant than what we anticipated in our forecast for April,” he stressed.
According to Nabiúlina, the influence of the fall of the ruble and the temporary increase in the demand for basic goods on inflation has already been exhausted, since this indicator “approached zero last week and in recent weeks inflation in its Annual expression was stable, slightly above 3% “.
In turn, she pointed out that Russian industrial production fell in April by 6.6% compared to the same period of the previous year.
“It is less than many expected and it is less than in most countries. The extractive industries, which have a great weight in the Russian industry, contained the negative dynamics in this sector,” he argued.
However, according to the BCR leader, the side effects caused by the decrease in final demand and the reduction in oil extraction under the OPEC + alliance agreement that entered into force at the beginning of the month “may be negatively reflected in May industrial production. “