Elvira Nabiullina: Current economic environment and monetary policy in Russia Statement by Ms Elvira Nabiullina, Governor of the Bank of Russia, at the State Duma of the Russian Federation on the Bank of Russia Annual Report for 2014, Moscow, 16 June 2015. *  *  *  Good afternoon, distinguished colleagues! While introducing the Bank of Russia Annual Report, I will give a brief overview of our activities such as monetary policy, banking and financial market regulation and supervision, and the national payment system. Before passing on to the report, I would like to briefly describe the current economic situation, the environment, in which we implement our policy. The last year was a troubled one, oil price fall and financial sanctions emerged as serious challenges to the Russian economy. The economy has slowed while decline in investments became manifest in the period of high oil prices and rather low interests rates. This determined the specifics of the current situation – unfavourable developments in external conditions overlapped structural economic slowdown. The situation was especially challenging as the economic downturn coincided with high inflation. Currently, we have managed to curb inflation. According to our forecast, an economic growth (quarter-on-quarter) is expected to resume later this year. Certainly, a lot will depend on the efficiency of the joint efforts of the Government and the Central Bank. The observed improvement and financial stabilisation must be supported by structural changes. They are indispensable for a sustainable economic growth. These include a better business climate and higher labour productivity.
How do we see our objectives in the current conditions? Our priority task remains unchanged– it is the price stability. Despite a leap in inflation last year and earlier this year, our medium-term inflation target is still 4%. We estimate it to be achievable. Another important task is to maintain financial stability amid current turbulence. And third, we ultimately aspire to creating balanced macroeconomic conditions to put the economy on the track of sustainable economic growth. We will have to tackle these issues in challenging external conditions. The pace of the global economic growth will not be high; other countries’ monetary policy will keep influencing the Russian economy; the oil market is likely to remain unstable. Therefore, the economy will have to adjust to the new realities when both oil prices and exchange rates fluctuate both upwards and downwards. A few words on the banking industry. Economic developments of the last year could not help but impact banks. Generally, all the economic indicators showed quite good dynamics last 2  BIS central bankers’ speeches  year – assets and lending were on the rise. Profits, though 40% lower than in 2013, were non-negligible at the level of 600 billion rubles. However, the situation certainly began to change. We can see slower lending rates. In some months of the year we have registered losses in the banking system as a whole. Profits in January-May this year amounted to nine billion rubles.