Page 112 - RusRPTOct22

regulator is not facing a more isolated financial system, in the long-term the analysts see the need for a sustainable reduction of the neutral interest rate level to below 6%.
Key focus remains on the uncertainty of the government's fiscal policy in new economic conditions. So far the CBR is not viewing the budget as a risk unless there is "additional deficit expansion", according to Nabiullina, but any additional fiscal stimulus will be watched by the CBR due to its effects on inflation and exchange rate.
"A long-term fiscal policy shift towards softer fiscal policy means that the central bank will have to maintain higher rates to ensure price stability," the CBR governor said.
Monetary policy and inflation have always been among the CBR’s top priorities, however with yet another cut in rates on September 16 the emphasis is turning to growth again. In 2015-16, in the period of economic distress and high uncertainty, the regulator was primarily focused on economic activity and growth weakness. In 2020-21, COVID-19 crisis and related issues became another important factor, which the CBR had to assess in its monetary policy. In general, a comprehensive picture of factors that drive the regulator’s decisions may enhance the predictability of its further monetary actions. It became especially clear in 2Q22 – when despite significant inflationary pressure, the regulator actively slashed the interest rate, apparently expecting that demand related inflationary pressure would soon ease under the consumption weakness.
112 RUSSIA Country Report October 2022 www.intellinews.com