Quotes: Russia’s Nabiullina on rates, inflation, oil and banks

© Reuters. FILE PHOTO: Elvira Nabiullina, Governor of Russian Central Bank, attends a session of the St. Petersburg International Economic Forum (SPIEF) in Saint Petersburg, Russia June 16, 2022. REUTERS/Anton Vaganov

(Reuters) – Russian Central Bank Governor Elvira Nabiullina and deputy governor Alexei Zabotkin gave a news conference after the central bank left its key rate unchanged at 7.5 percent on Friday.

The central bank officials spoke in Russian. The quotes below were translated into English by Reuters.

NABIULLINA ON DECISION TO LEAVE KEY RATE UNCHANGED

“The economy continues to adapt to ongoing changes. At the same time, new factors have emerged that can be classified as pro-inflationary in the medium term. Primarily, this is the increase in geopolitical tensions, the partial mobilisation, as well as a deterioration in the situation of the global economy. With this in mind, a decision to keep the rate unchanged today seems to be the most balanced.”

“This time we had a very broad consensus on the decision that the rate should be left unchanged. As for our further actions, we believe that monetary policy is now in the neutral zone and in doing so we have given a neutral signal. This means that the further trajectory of the key rate, the direction of our monetary policy will depend on future data on the economy, inflation, inflation expectations, and, depending on what factors carry the most weight, we may maintain, increase or decrease the rate.”

NABIULLINA ON INFLATIONARY EFFECTS OF MOBILISATION

“In the coming months, due to a decrease in consumer demand, its effects will be disinflationary, but then pro-inflationary effects may appear through changes in the structure of the labour market, a shortage of personnel in certain areas. It is still difficult to assess all the economic consequences of the shift in employment structure. They will manifest themselves gradually through the adjustment of wages and the increased flow of labour between industries and regions.”

NABIULLINA ON EU PRICE CAP ON RUSSIAN OIL EXPORTS

“Few people can imagine all the consequences, what they will be in aggregate. What is important for us? That, as these consequences can be very different, to remain conservative in the forecast for oil.”

“There were two rather contradictory factors. On the one hand, the actions of OPEC+. On the other, a possible decrease in demand for Russian energy resources, both as a result of a slowdown in global economic growth and as a result of various export restrictions. So it is important for us to remain conservative.”

NABIULLINA ON FOREIGN BANKS IN RUSSIA

“We treat them like Russian banks and all regulation and supervisory practices are exactly the same. But in fact, transactions with the assets of a number of them on the list requiring special permission. Until such criteria are established, work is underway on the decree. The whole set of factors will be considered. I don’t see any potential need for a bail out yet. We don’t see any cases that may required it in the short term, because the banking system as a whole is stable. And as for the ability to sell assets, the decree applies only to transactions with shares.”

NABIULLINA ON BANKING SYSTEM PROFITABILITY

“The profitability of the banking system is recovering, we expect this trend to continue in 2023. As for the policy on dividends, our recommendation to banks that took advantage of our regulatory easing this year was not to pay dividends. But if they do not take advantage of it, if they are profitable, they can pay dividends. We will additionally consider whether this recommendation should be kept for the future, it may not really be as expedient as it was this year”

ZABOTKIN ON EFFECT OF MOBILISATION ON INFLATION

“The inflation forecast for this year speaks for itself. It has shifted slightly upwards and this upward shift mainly reflects the transfer of tariff indexation from July next year to December … For the next year, our inflation forecast has not changed either. The baseline scenario is that the cumulative impact on the inflation trajectory of all that has taken place since July is approximately neutral.”

ZABOTKIN ON CHANCES OF A RATE CUT IN DECEMBER

“If we saw a significant chance of a rate cut in the next few meetings, we would have said so in the press release.”

Source: Investing.com