Russian Central Bank’s Decision To Keep Interest Rate ‘Justified’: Novak

MOSCOW, Dec 25 (Bernama-Sputnik/RIA Novosti) - The Central Bank of Russia has made a "justified" decision during the latest meeting to keep the key rate at 21 per cent, Russian Deputy Prime Minister Alexander Novak said on Wednesday.

On December 20, the Central Bank said that it decided to keep the key rate unchanged at 21% per annum, while the market expected it to increase to 23 per cent.

"The fact that the Central Bank did not increase the interest rate at its latest meeting and kept it at its current level is a positive development. This is a justified decision," Novak told the Rossiya 24 broadcaster, reported Sputnik/RIA Novosti.

The deputy prime minister also said that high inflation still persists and is driven chiefly by the food industry, so it is essential to maintain a balance between supply and demand. This can be achieved primarily by increasing production and supply, the official stated, adding that it is important to find a balanced approach to budgeting in order to avoid additional inflationary pressures.

 Novak pointed to the importance of monitoring the situation in both the consumer and commercial lending markets.

"This year, the level of lending in the banking sector has been very high. However, today we are already witnessing a slowdown due to measures taken by the central bank and the Russian government.

“These measures should have an impact on reducing inflation, and we hope that the trend has already reversed. We will continue to monitor the situation and take necessary measures to ensure that inflation reaches levels that support sustainable economic growth and low inflation expectations in the medium term," Novak said.

Central bank head Elvira Nabiullina said last week that Russia's economy is currently in an extraordinary situation that complicates the impact of the regulator's key rate on inflation, adding that the central bank must ensure that Russia's economy does not continue to overheat while also avoiding excessive cooling.

--BERNAMA-SPUTNIK/RIA NOVOSTI