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an Unusual situation in that the Central Bank reduced the rate by one percentage point – up to Friday it was 5.5%. Typically, the step movement rate is much more modest – 0.25, or 0.5 percentage points. But the new standard of monetary policy, such a drastic step of reducing the rate of the Central Bank does not consider, said at a press conference the head of the Bank of Russia Elvira Nabiullina, answering the question of “the Russian newspaper”. “You know in General our approach: to move gradually, carefully, keeping track of all effects by analyzing all incoming information,” said Elvira.

so much Central Bank lowered the interest rate because of the low rate of inflation due to depressed demand and the need to stimulate the slowed economy. By mid-June, the annual inflation rate was 3.1% with the objectives of the Bank of Russia to 4%. According to the forecast of the Central Bank, the current monthly inflation in annual terms will continue to decline. According to Nabiullina, the fall in demand in the second quarter will be deeper than expected, and his recovery will be delayed. This is a direct effect of the pandemic and related restrictions.

Now there are signs of partial recovery in economic activity, but to restore production and supply chain will take time, said Nabiullina. Moreover, could change as the investment plans of the business and the attitude of citizens to the costs (many will probably prefer to save). All this will impact on the speed of economic recovery. Thus, in the opinion of the Central Bank, GDP will return to the figure of 2019 is only in 2022.

Thus, the current policy of the Bank of Russia is directed on formation of loose monetary conditions in the economy in conditions of low inflationary pressures and prevailing disinflationary risks, said Nabiullina. Based on the dynamics of inflation and data on the economy, the Central Bank will assess the feasibility of further lowering the key rate at the next meeting (they will be on 24 July and 18 September).

Key rate at 4.5% – a new low since the introduction in 2013 of legislation of the concept of “key rate”, designed to replace the refinancing rate for the background transition of the Central Bank to control inflation and price stability. To this at least the key rate was 5.5% per annum, with which she began her story.

the rate cut will reduce the cost of basic banking products – deposits, consumer credits, mortgages. It also helps the economy as a whole because it will make more affordable loans to companies and citizens. Citizens and businesses have the opportunity to refinance loans at lower interest rate to reduce its debt burden and free up resources for consumption and investment.

the Central Bank expects Deposit rates to remain above inflation, said Nabiullina. In her opinion, dolgor��cnie rates on deposits will be more attractive from the point of view of interest rates than short-term. Now the average maximum rate on deposits in top-10 banks by volume of attracted funds of citizens barely exceeds 5% and, obviously, will continue to decline.