Elvira Nabiullina: Review of recent inflation developments in Russia Statement by Ms Elvira Nabiullina, Governor of the Bank of Russia, in the follow-up to the Board of Directors meeting, Moscow, 24 March 2017. * * * Today the Bank of Russia Board of Directors decided to reduce the key rate to 9.75 p.a. The economic situation is more favourable than we expected in December 2016. The upturn in the economy has started earlier and is progressively gaining sustainability. The balanced growth in supply and demand exerts no considerable inflationary pressure. Inflation is slowing down faster than we predicted. Inflation expectations continue to go down. These developments favour a change in the key rate. We reduced it today by a quarter percentage point and we are looking into further cuts in the second and third quarters of this year. At the same time, we need to be convinced that the positive trends will gain momentum. We need to see inflation not just slowing down, but anchoring near the 4% target. Therefore, inflation expectations should be anchored at this level. Inflation risks have abated somewhat for now, but they may materialise over the forecast horizon. Therefore, we will reduce the key rate progressively in the medium term and are likely to take short pauses while sticking to moderate tightness in our monetary policy. We will mostly rely on our pivotal meetings when we update and release our macroeconomic forecast whereon our decision is based.
Chart 3 shows the paths of short-term forward interest rates in the UK, US, euro-area and Japan for the next 30 years. They imply that rates will rise, on  BIS central bankers’ speeches  1  average, by only 10 basis points per year in the US, 7 basis points per year in the UK, 6 basis points per year in Japan and 5 basis points per year in the euro-area. That is the most gradual of interest rate glide-paths. The eventual cruising altitude for interest rates expected by financial markets is also remarkably low by historical comparison. The level of forward interest rates 30 years hence is around 3% in the US, 2.5% in the UK, 2% in Japan and 1.2% in the euro-area. Up until the crisis, the average level of policy rates in these countries in the post-war period was 3%, 7%, 4% and 3% respectively – for most, roughly double the levels currently expected. Interest rate end-points are also remarkably low. In a growing number of countries, interest rates are not just low but have recently turned negative. At last count, eleven countries had negative shorter-term bond yields, including nine within the euro-area. In part, that reflects the effects of a recent further round of policy loosening by central banks. At present, two-thirds of countries globally have policy rates below 3% (Chart 4).