MOSCOW, Dec 19 (Reuters) – The governor of Russia’s central bank, Elvira Nabiullina, spoke on Friday after the bank cut its key interest rate by 50 basis points to 16%.
Here are some of the most important things she said. She spoke in Russian, and her words were translated by Reuters.
NABIULLINA ON RATE DISCUSSIONS:
“We considered three options: keeping the rate unchanged, cutting it by 0.5 percentage points, and cutting it by 1 percentage point. Those who proposed maintaining the key rate emphasized the fact that it was still premature to judge the sustainability of the inflation slowdown.”
“Because it has been volatile in recent months, it’s quite difficult to judge sustainability based on just one month. Considering the inflationary factors that are expected to materialize in the near future, including increases in VAT and tariffs, they also noted a significant acceleration in lending and continued elevated inflation expectations.”
“Those who proposed a larger step believed that the current inflation slowdown was already quite sustainable. However, under these circumstances, the majority still believed that a more balanced, more cautious decision was needed, about cutting the rate by 0.5 percentage points.”
NABIULLINA ON VICTORY OVER INFLATION:
“I can definitely say that we’ve come a significant part of the way, but the second half, as we know, is always harder … One month of low inflation is definitely not enough. And that’s why, by the way, we’re looking at and paying more attention not even to monthly inflation, but to three-month, seasonally adjusted, rolling inflation. It averaged 5.2% over the past three months. And that’s above our target. Add to that inflation expectations, and you’ll understand why we’re so cautious about lowering the rate … We see that we’ll reach a neutral level in 2027.”
NABIULLINA ON POSSIBLE INFLATION SURGE AND MONETARY POLICY IN 2026
“We are indeed taking a rather cautious approach to rate decisions, given the current prevalence of inflationary risks. Yes, as you can see from our forecast, the baseline scenario assumes a rate cut next year, but given the inflationary factors associated with high inflation expectations and other factors … we will, of course, proceed cautiously.”
“As for inflation dynamics over the next year, yes, some growth is possible, an increase in the current rate of price growth in January due to the VAT increase. However, we believe that sustained inflation will continue to decline after this surge, and that in the second half of the year, sustainable inflation components will fall to around 4%. A slight increase in the current rate of price growth is possible in October, when tariffs are indexed, but we also believe this will be temporary.”
NABIULLINA ON LAWSUIT AGAINST EUROCLEAR OVER ASSET FREEZE:
“We have no plans to withdraw our claims for now.”
“As for how the court’s decision will be enforced and how damages will be claimed, this will be determined after the court’s decision is issued and enters into legal force. I would like to say that we are also considering the possibility of defending our interests in international courts and arbitration tribunals, with subsequent enforcement of such courts’ decisions in other countries.”
“It’s difficult for me to comment on the specific arguments that prevailed (against asset seizure at the EU summit). Various arguments were actively discussed in the press. But, first and foremost, I think it’s because this decision would have undermined the fundamental foundations of the international financial system.”
NABIULLINA ON FINANCIAL RISKS AND STABILITY OF THE BANKING SYSTEM
“Financial stability issues are always a priority for us; they are always important. But we don’t currently see any risks to financial stability.”
“As for the stability of the banking system, it remains quite stable. We see that, yes, there is some growth in problem loans, but the share of, for example, bad corporate loans has increased only slightly and remains at around 4%. That’s not much. The banking system is well capitalized again, and in our view, there are no issues here either.”
ABOUT DEFAULTS IN BUSINESS
“We don’t expect that tight monetary policy, in particular, will lead to a systemic increase in problem loans. Yes, some defaults happen at almost any time. We are closely monitoring the quality of corporate debt at banks and the overall quality of loan servicing. Despite the increase in rates and the increased interest burden on companies, it remains high.”
(Reporting by Reuters Moscow Bureau, Compiled by Felix Light, Editing by Mark Trevelyan)
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