Risks from premature key rate lowering may be material — Bank of Russia
The experience of other countries shows that too early lowering of rates leads to a second wave of inflation and it is even more difficult to cope with it than with the first one, the regulator said
MOSCOW, April 1. /TASS/. The Bank of Russia pointed in its materials to significant risks from the premature lowering of the key rate.
"Risks from the premature key rate reduction can be material. Economic agents can revise expectations to the side of the too quick reduction of interest rates. This may lead to further decline of the trend for saving and as a consequence to further growth of demand and inflation," the Central Bank indicated. The experience of other countries shows that too early lowering of rates leads to a second wave of inflation and it is even more difficult to cope with it than with the first one, the regulator added.
"Such ill-timed lowering may require from monetary authorities new and more significant increases of the rate later on," the Central Bank said.