February 1, 2018 / 12:19 PM / 24 days ago

UPDATE 1-Russia central bank chief says may speed up rate cuts

(Adds quotes, detail)

By Denis Pinchuk

ROSTOV-ON-DON, Russia, Feb 1 (Reuters) - Russia’s central bank may cut rates faster than previously thought and possibly as soon as next week, Governor Elvira Nabiullina said on Thursday, adding that she saw little economic or financial impact from possible new U.S. sanctions.

The central bank embarked on a rate-cutting cycle in 2015, and with once stubbornly high inflation now below its target is seen easing monetary policy further.

Nabiullina said the board will consider a few options when it meets on Feb. 9 to review its rate policy.

“We don’t rule out a pause but we don’t rule out a rate cut either,” she told reporters.

Analysts and economists polled by Reuters in late January said they expected a small rate cut at this month’s meeting -- from a current 7.75 percent -- as annual inflation has slid below the central bank’s target of 4 percent.

Nabiullina also said the key rate could be brought to a “neutral” level of 6 or 7 percent, sooner than the central bank had planned. It has said it expects rates to reach those levels in a year or two.

“Now we see that inflationary risks related to external factors have eased. That’s why we don’t rule out that we will switch to neutral monetary policy quicker than we considered earlier,” she said.

Nabiullina’s comments come a day before the start of the “week of silence” the central bank observes in the run-up to a rate decision.

Nabiullina also said the central bank was aware of possible risks if Washington decides to impose sanctions on holdings of Russian government debt, something the United States had been expected to announce earlier this week.

“We saw this risk before and see it now,” Nabiullina said, adding that the central bank had studied the impact of possible sanctions on both holdings of the existing treasury bonds, known as OFZs, and debt to be issued in future. If sanctions are imposed there may be some volatility in Russian bonds but this is likely to be a short-lived reaction before markets stabilise, Nabiullina said, reiterating the bank’s previous stance.

“Here we see no big impact on the economy or financial stability and the financial sector,” she said.

Reporting by Denis Pinchuk; Writing by Andrey Ostroukh; Editing by Catherine Evans

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