(Adds new quotes marked with asterisk)
MOSCOW (Reuters) -Russian Central Bank Governor Elvira Nabiullina and her deputy Alexei Zabotkin addressed a news conference on Friday after the central bank, as expected, kept its key interest rate on hold at 21%.
Nabiullina and Zabotkin spoke in Russian. The quotes below were translated into English by Reuters.
*NABIULLINA ON SIGNALLING OPTIONS
We considered two signalling options – neutral and moderately tight. We would consider a rate hike if disinflation does not move as steadily as we wanted.
*NABIULLINA ON IMPACT OF INTEREST RATE ON INVESTMENT ACTIVITY
According to preliminary data, investment activity in the first quarter of 2025 remains more or less at the level of the fourth quarter of 2024. Therefore, we should not talk about any decline in investment activity. There is a shift in investment plans. But, in our opinion, investment activity will remain relatively high. Because the main resource for financing investments is the companies’ own funds. Loans occupy a much smaller share in the sources of investment financing. And the financial result or profit of companies was quite large in previous years. We also keep telling companies that they should enter the capital market more actively and attract not only debt financing from banks, but also debt financing from non-bank organisations and equity financing.
NABIULLINA ON THE DECLINE IN LENDING RATES
The rate of credit growth has significantly decreased compared to last year. But there is still a lot of noise in the data … We will be able to speak more or less confidently about the sustainability of the trend in corporate lending only on the basis of the second quarter data.
NABIULLINA ON POSSIBLE RETURN OF WESTERN BRANDS
We did not take this factor into account in the decision on the key rate, because it is still only a hypothetical possibility. But the systemic sustainable improvement in the terms of foreign trade, the reduction in the costs of obtaining imports, to which the hypothetical return of brands could lead, it is disinflationary. But only if not only imports but also exports expand. Otherwise, if only imports grow and exports remain the same, it will lead to a weakening of the exchange rate, the rouble exchange rate, and this will again be a factor of price growth.
NABIULLINA ON IMPACT OF ROUBLE APPRECIATION ON BUDGET
For the exchange rate to have a significant impact on something, it must be a stable trend. So far it is premature to talk about this in the exchange rate. As for the impact on the budget, we need to look at the cumulative effects on both revenues and expenditures. In fact, rouble appreciation, all other things being equal, is a disinflationary factor. If the rouble strengthens steadily, it may mean a softening of monetary policy and a reduction in interest expenses for the budget. Therefore, I think we should analyse different channels of influence for the budget.
NABIULLINA ON RISKS OF INCREASING DEMAND FOR GOVERNMENT BONDS
So far, we do not see such risks. If there is such interest, it is not expressed on a large scale. We do not see any risks to financial stability in the growing demand for government bonds. Because we see that this demand in the primary market and in secondary exchange trading is being made by a wide range of participants. These include banks and institutional private investors. The interest is driven not only by geopolitical expectations, but also by the first signs of slowing inflation.
NABIULLINA ON NON-RESIDENTS’ INTEREST IN RUSSIAN ASSETS
We do not have reliable data that we could rely on to show the manifestation of this interest. Although this topic is being discussed quite widely. And, of course, there are objective reasons for such interest – differential rates, difference in yields when investing in Russian assets. But, of course, the realisation of this interest is hindered by restrictions on capital movement and sanctions. We will monitor this situation.
NABIULLINA ON ROUBLE VOLATILITY
The exchange rate affects inflation expectations. But inflation expectations do not automatically follow the exchange rate. We see that exchange rate volatility, unfortunately, now, due to sanctions restrictions, is higher than in 2022. And, of course, this is not a factor that would contribute to the reduction of inflation expectations. But what I want to emphasise is that the lower the inflation, the more stable the exchange rate. Therefore, if and when we achieve sustainable low inflation, it will also work to stabilise the exchange rate.
NABIULLINA ON RATE DECISION
A key rate cut was not discussed by the bank today. It will be possible to start cutting the rate only after we are sure that inflation is falling steadily and at a rate that will allow us to bring inflation back to 4% in 2026.
NABIULLINA ON FURTHER STEPS
We see a reduction in the current inflationary pressure, but it is under the influence of both sustainable and some one-off factors. We will have to make sure that inflation is steadily declining. If the pro-inflationary risks that we note are realised, we may need to raise the rate. Let me remind you that our average key rate range for 2025 is 19-22%.
(Reporting by Anastasia Lyrchikova in Moscow and Darya Korsunskaya in London; Editing by Mark Trevelyan)
