This is necessitated by the still high sensitivity of inflation to oneoff factors, as well as its inertia and elevated inflation expectations. As they stabilise close to the target level of inflation, prices are expected to be less responsive to various short-term factors. These new conditions would see no need for additional tightening in the monetary policy stance to ensure that inflation holds near 4%. This conservative strategy in monetary policy may appear unattractive short-term; however it will enable us to deliver on a more sustainable result in the mid-term, that is, deliver on the objective to establish in Russia a low price and cost growth environment – such that favours both households and businesses, as well as the overall economy. Q&A for the Media QUESTION from Vedomosti: Given the Bank of Russia’s move to reduce the rate and its guidance that further rate reduction is not impossible in the second and third quarter, does that suggest that the Bank of Russia has launched a monetary loosening cycle? ELVIRA NABIULLINA: An easing cycle is understood as a process of sequential rate reduction, decided at each policy Board meeting. Having said that, we acknowledge that the sequence of rate cuts may be interrupted, though this would not run counter to an overall mid-term downward movement of the rate. We will move forward with care and precision. For the most part we will be largely guided by economic data as well as, certainly, by our forecasts.
The exchange rate is governed not only by oil – oil is an important factor, but not the only one to influence the exchange rate. The depreciation of the ruble was also largely triggered by typical seasonal variation in the current account – the current account usually shows stronger performance in the first quarter, irrespective of oil prices. The second factor is the growth in oil prices and oil sales by exporters. The third factor is important but the Central Bank believes that it should not be overestimated or exaggerated. I am referring to certain inflows of capital, which are comparable to the inflows of foreign capital to emerging markets. Further developments will depend on many factors: oil price movements, the Fed’s policy, strengthening or weakening of the exchange rate, and the strength of our economy. There are many forces at play here. QUESTION from TV channel Russia-24: Mrs Nabiullina, you have already mentioned that the Central Bank will support Russian stateowned banks affected by sanctions in relation to the situation in Ukraine. What specific measures are you going to take? Thank you. ELVIRA NABIULLINA: I would like to repeat and emphasise that we do not see any risk to financial stability of our credit institutions even if their investments in Ukrainian assets depreciate completely, because they account for only a very small share of their assets. Therefore we do not see any systemic risks here. Our banks have already created or are creating provisions for such assets.