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MOSCOW May 11 Russia's central bank governor
Elvira Nabiullina says she prefers cutting interest rates in
small steps as the bank gradually eases monetary policy, adding
that inflation expectations needed to be dampened further.
Nabiullina, in an interview published on Thursday, also told
the EM communications agency that neutral nominal interest rates
would be at 6.5-6.75 percent given the central bank's inflation
target of 4 percent. Inflation is close to that level now.
The interest rate currently stands at 9.25 percent. It has
come down from 10 percent in autumn of last year to 9.75 percent
in March and then to 9.25 percent in April.
"The Bank of Russia prefers gradualism in its policy," she
said. "It's better to move down by small steps than
significantly cut down the rate and then due to an unexpected
shock raise it back."
Nabiullina, who became central bank chief in mid-2013, has
made bringing inflation down to 4 percent by the end of this
year one of her priorities. It dropped to 4.1 percent in April
in year-on-year terms after rising 4.3 percent in the previous
"Now, when inflation has already fallen significantly, the
Bank of Russia still has to make sure that inflation will remain
close to the target of 4 percent in the medium-term," Nabiullina
said. "In order to achieve this, we need to further dampen
Ksenia Yudayeva, the central bank's first deputy governor,
said last month the bank could reach its inflation target much
earlier than expected. Economy Minister Maxim Oreshkin has said
the 4 percent goal could be reached as early as this month.
Nabiullina repeated that the central bank considered it
possible to restart replenishing the country's forex reserves
once it had met its 4 percent inflation target.
"We will purchase currency for reserves only if the market
situation is stable and our operations don't affect the FX
rate," Nabiullina said.
Since mid-February, the central bank has been conducting
forex purchases on behalf of the finance ministry aimed at
boosting the country's fiscal buffers, but the size of the
purchases has been small and has done little to weaken the
Russian authorities say the purchases are aimed at shielding
the country from external shocks, but some analysts see them as
an attempt to stop the rouble from strengthening too much and
spur an economic recovery.
The rouble continued strengthen on Thursday, rising 0.5
percent against the dollar by 1150 GMT, as Brent
crude oil prices recovered further and held above $50 a
(Reporting by Andrey Ostroukh and Alexander Winning; Editing by
Katya Golubkova and Tom Heneghan)