Nabiullina called the risks of a rapid reduction of the key rate

Monetary policy the Bank of Russia in the coming half year will remain moderately tight. This was stated by the head of the Central Bank Elvira Nabiullina at the plenary meeting of the state Duma on Friday, reports .

“Moderately tight policy means that we will set rates in the economy at the level slightly above inflation”, — said Nabiullina.

The Bank of Russia will continue to generate positive interest rates in the economy. This level of bets does not prevent, but also helps economic growth, said the head of the Bank of Russia.

“There is a common misconception that lower rates now could quickly make for the companies the borrowed funds cheaper,” — said the head of the Central Bank. She stressed that if the Bank of Russia now will begin to hold soft monetary policy, the reduction of the key rates will have only a short-term stimulating effect on the economy.

“Low interest rates in the current environment can cause the growth of attractiveness of investments in dollar assets and cause the weakening of the ruble. This will lead to inflation and reverse the growth rates,” — said Nabiullina. Consequently, for a short period of economic growth, the economy could slip back to recession, she added.

According to Nabiullina, the current real rate in the economy should encourage businesses to optimize costs, not shifting them on the population in the form of higher prices. In this case the Bank of Russia does not believe that the rates for business should not be reduced. “They will fall, but it should occur on the basis of lower inflation,” — said Nabiullina.

In late November, the Russian presidential adviser Sergei Glazyev said that the attempts of the Bank of Russia to reduce inflation through tighter monetary policy lead to degradation of the economy and the fall in its competitiveness. In the future this may lead to the devaluation of the ruble and a new wave of inflation, believes eyes.

At the meeting of the Board of Directors at the end of October the Bank of Russia left its key rate unchanged at 10% per annum. The Central Bank stressed that for sustained inflation, the key rate should remain at this level until the end of 2016. As confirmed on Friday Nabiullina, the possibility of a rate cut in the Bank of Russia consider it until first or second quarter of 2017.

The CBR believes that this decision will help to achieve annual inflation of less than 4.5% in October 2017 and its reduction to the target level of 4% by the end of 2017. The Bank of Russia expects that by the end of 2016 inflation will be 5.5–6%. According to Rosstat, in October 2016, it was 6.1%.