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This content was produced in Russia where the law
restricts
coverage of Russian military operations in Ukraine
(Adds inflation expectations data)
MOSCOW, April 20 (Reuters) - Inflationary risks in
Russia must decrease in order to create room for interest rate
cuts, Central Bank Governor Elvira Nabiullina said on Thursday,
in hawkish comments a week before the bank next sets interest
rates.
The central bank has become more wary of inflation this
year, warning of the risks of a widening budget deficit, weaker
rouble and labour shortages. Its key rate currently stands at
7.5%.
Annual inflation decelerated sharply to 3.51% last month due
to the high base effect. Prices in March 2022 rose by 7.61% in
month-on-month terms after Russia sent tens of thousands of
troops into Ukraine in February last year.
Nabiullina, in a copy of her speech to lawmakers posted on
the central bank website, said annual inflation would slow again
in April, but warned that price expectations among households
and businesses remain high, above 2018-19 levels, when inflation
was near the 4% target.
Households' inflationary expectations for the year ahead
fell only marginally to 10.4% in April from 10.7% a month
earlier, data showed on Thursday.
"External conditions also remain difficult," Nabiullina said. "In order to create space for further rate cuts, it is necessary that pro-inflationary risks decrease.
"If we sacrifice price stability, we will not be able to protect our citizens and enterprises in the future." Promsvyazbank analysts forecasted a rate hold next week, saying inflation was continuing to move below the central bank's target and remained subdued, meaning there were no grounds to raise the key rate.
Nabiullina said the bank was committed to maintaining a floating exchange rate and would only enter the currency market when there was a risk to financial stability - as there was last spring when Western nations started imposing punitive sanctions on Moscow over its actions in Ukraine. (Reporting by Elena Fabrichnaya and Alexander Marrow; Editing by Mark Potter, Hugh Lawson and Jonathan Oatis)
