Russian central bank’s Nabiullina: We should be able to lower the key rate faster

The Russian central bank Governor Elvira Nabiullina hinted at a faster rate cut, in her appearance on Monday.

Key quotes

We should be able to lower the key rate faster.

We should create conditions for loans to be more affordable for the economy.

Monetary policy toughening in 2021, diversification of fx reserves helped economy to stay resilient amid sanctions.

Russian banks reduced share of assets denominated in foreign currencies to 19% as of beginning of 2022 vs. 35% in 2016.

Russian economy is entering difficult period of structural changes related to sanctions.

Main problems for economy will be related to restrictions on imports and logistics in trade, export restrictions.

Central bank monetary policy will aim at bringing inflation to 4% target in 2024.

Central bank considering making sale of forex proceeds by exporters more flexible.

Decision to suspend markets was necessary, otherwise exit of foreigners would have caused volatility and triggered mass bankruptcies.

The bank manually managed the markets to limit volatility and cool emotions of market participants.

Market reacted to the new situation much more softly than expected.

Russians withdrew 2.4 trillion roubles from banks in late February - early March.

Central bank plans to launch a programme to stimulate the import of equipment and raw materials which Russia cannot source itself.

The central bank more than doubled its key interest rate to 20% when Russia was hit by the Western sanctions after its military special operation into Ukraine in February but then cut it this month to 17%.

Market reaction

USD/RUB is extending its declines on the above comments. The spot is trading at 81.12, having failed to resist above the $83 mark.