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Russian Central Bank may introduce key rate forecasts

The Bank of Russia is discussing an opportunity to publish forecasts on further key rate moves

MOSCOW, June 16. /TASS/. The Bank of Russia is discussing an opportunity to publish forecasts on further key rate moves, the Central Bank governor Elvira Nabiullina said on Friday after the Board meeting.

"We are discussing such an option but from our point of view, we need to complete some information work and preparation prior to starting publications of such forecasts, either midterm or long-term, so that such forecast is not perceived as a commitment of the Central Bank to move in that corridor," Nabiullina said.

"I assume pauses if risks we were talking about materialize. We do not have any pre-determination in terms of the step: 0.25 percentage points or 0.5 percentage points. We also assume we may take a pause if the assessment of risks, midterm risks in the first instance, shows that probability of their materialization increases," Nabiullina said.

The Russian Central Bank should maintain a moderately tight monetary policy at this stage, even with further declines of the key rate, she went on.  "It will be supported even if the key rate is lowered. We believe that for some time we will need to maintain this moderately tight policy," she said.

"We have not addressed changes in the credit rating in our outlook. We are fairly conservative in terms of all indicators. However, if the rating is upgraded, and all grounds and rationale to do so are in place from my point of view, then it will improve the investment appeal of Russian assets and the ruble in general," she said.

If the rating upgrade indeed takes place, it will be smooth, Nabiullina added.

"Reserves are now sufficient in all respects, but it would be useful to strengthen our safety cushion in favorable conditions and to accumulate gold and foreign exchange reserves. We reaffirm our principles that we will do this, without jeopardizing our inflation target of 4%. Our goal is not just to reach it once, but keep it at this level for a long time. Therefore, we cannot say that we have fully achieved our inflation target," she said.

According to Nabiullina, financial markets are quite stable, but there are medium-term risks associated with oil prices. "We should take this into account," she said.

US sanctions 

Sanctions toughening by the United States will not have a major impact on the Russian financial market, she said. 

"The Central Bank does not see high impact of sanctions toughening on the Russian financial market. By the way, the effect of earlier introduced sanctions has almost exhausted, from our point if view. Regarding the impact for banks - yes, financing terms will decline from 30 to 14 days; we do not see high risks for the banking system in this regard," she said.

"Concerning the debt, it is unclear what is anticipated and whether anything is provided. From our point of view, if it pertains to new issues of OFZ government bonds, I do not think this is a major problem for the Finance Ministry and the economy at large. We do not have big plans to increase the government debt and investors interested in such securities are present. If a potential prohibition to hold such OFZ bonds appears, then sellouts from portfolios will mean losses for companies that made investments, US companies in the first instance, which will have to sell cheaply. Russian financial market participants will buy such assets with pleasure," Nabiullina said.

Oil price in 2017

The Bank of Russia has retained its forecast for the average oil price in 2017 at $50 per barrel.

"We kept the price of oil unchanged - $50 per barrel in 2017, taking into account the current price dynamics and analysis of the prospects of the oil market," she said.

GDP growth

The Bank of Russia forecasts national GDP growth to be 1.3% in the third quarter of this year, she said.

"Concerning GDP, we indeed slightly raised our outlook but it remains a bit lower than the outlook of the Economic Development Ministry. It equals approximately 1.3% for the third quarter," she said.

Capital outflow

The Bank of Russia expects the capital outflow will be at the level of $37 bln this year, she went on. 

"Our capital outflow data are as follows: we will have $37 bln in 2017; [$] 14 bln under the forecast for 2018, and [$] 8 bln in 2019," she said.

The figure will largely depend on the current account balance, Nabiullina added.