Interfax: Peak of inflation has passed, but risks remain – Nabiullina

Elvira Nabiullina file photo

MOSCOW. June 8 (Interfax) – The Central Bank of Russia is expecting a reduction of inflation and noted that its peak has already passed, although risks exist for it, Central Bank Governor Elvira Nabiullina said.

“Weekly inflation has remained at 0.1% for six weeks already. According to our estimate, we have passed the peak of inflation, we are forecasting its notable fall in the future, but risks, nevertheless, exist for inflation,” she said at a budget committee meeting at the State Duma on Monday.

The Central Bank noted the following may lead to risks: the normalization of the monetary policy in the United States, which may raise the volatility of all currencies in countries with emerging markets, which includes Russia, also to the accelerated indexation of tariffs of natural monopolies. “In my view, based on the role in inflation of tariffs of natural monopolies, it is necessary to very prudently and accurately approach the requests for raising these tariffs, in order to not heat up inflation,” she said.

The increase of tariffs, she said, will mean an increase in costs for companies, which will negatively affect future economic growth.

“There will be a double negative effect: the Central Bank will not be able to quickly lower the rate due to high inflation, and there will be direct growth of costs for companies,” the Central Bank head said.

Risks remain for the prices of oil, which are currently very volatile, Nabiullina.

“We have managed to get inflation under control, and if no new shocks occur, then by the end of this year, we are forecasting the start of economic growth quarter-on-quarter,” she said.

Nabiullina also said that the dominating factors, which are affecting the ruble’s exchange rate, are the prices for oil and geopolitics. The operations of the Central Bank for replenishing the gold and forex reserves, she said, are having a small impact on the performance of the national currency.

For May and the start of June, the Central Bank bought a little more than $3 billion on the market.

“With the appearance of volatility and risks for financial stability, we will be ready to change the volumes of purchases or suspend them,” she said.

[featured image is file photo]