The head of the Bank of Russia Elvira Nabiullina, speaking at the forum “Russia calling!” announced that the Central Bank hears wishes to stop inflation at the current level and start to decline rates, but it is still early, reports TASS.

“Inflation remains, unfortunately, very high,” she said, adding that low inflation is a necessary condition for economic growth.

“I understand the mood of many, who were concerned about high inflation in the past year, and now there are requests, it’s time to stop at the current level (6-7%), it is necessary to cut rates, inflation has returned to normal. You know, 6-7% was more or less normal inflation, when economic growth was based on ever-increasing oil prices. Now we need a different economic model, and this model should be the investment”, she said.

The head of the Bank of Russia stressed that the investment rate of inflation, according to the Central Bank of the Russian Federation, starts from 4% and below.

“Our calculations show that the equilibrium level of real interest rates in the economy can range from 2.5% to 3%. Then we come to the stable inflation of 4%. Then the level of interest rates, the key rate may be 6-6,5-7%. But we made up, we will support a slightly higher positive rates in order to provide a path of lower inflation,” – said Nabiullina.

4%, she said, is “the level at which the investments are predictable.”

Meanwhile, “investors and households think about inflation as a significant factor that may affect their plans, when they can build investment projects”, she concluded.

According to the Chairman of the Central Bank, the regulator currently celebrating signs of recovery in consumption, but must be the right balance between consumption and saving. “Then consumption will gradually recover, and we can already see signs of this”, – said Nabiullina.

Consumers, she said, had some confidence, the growth in retail lending. “But consumption should grow at a rate that will not lead to higher inflation, create bubbles. In our view, the growth rate of consumption should not be higher than the rate of growth of nominal income,” she said, stressing that savings need to be promoted and for this to be positive real rates.

Earlier at the same event, the head of Ministry of economic development (MED) of Russia Alexei Ulyukayev said that the recovery in investment activity will occur after the resumption of economic growth. “We expect the beginning of recovery in investment activity slightly later than the transition in the area of economic growth. The growth we actually go this year”, – said the Minister.

The speaker, however, warned that the decline in retail trade turnover in 2016 may exceed 5%, despite the expected fourth-quarter recovery in economic growth.

Too early: Elvira Nabiullina responded to requests to lower interest rates 12.10.2016

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