Russia’s financial system stable: central bank governor

Russia’s financial system is quite stable, as the country has funds to cope with the current problems caused by the COVID-19 pandemic, Russian central bank head Elvira Nabiullina said Friday.

“There is no need to support financial stability, as in general, it is quite stable, there are reserves of capital, and rainy day funds have been accumulated,” she said at a press conference.

Nabiullina said in a separate statement that the central bank board earlier on Friday decided to keep its key lending rate at 6 percent per annum despite a drastic change in the situation, in which “events are evolving according to a scenario different from expected by the bank at the beginning of February.”

She recalled that the coronavirus pandemic and measures taken to contain it exert pressure on the global economy, reducing simultaneously both output and demand, and influence the behavior of businesses and households.

The pandemic developments were accompanied by a profound drop in oil prices caused both by a considerable increase in oil production and a considerable decline in its consumption.

Coupled with the sharp drop in oil prices, global volatility dragged heavily on the Russian financial market and led to the ruble depreciation. All this will have a pro-inflationary effect and may feed through into inflation expectations.

The decision to keep the key rate unchanged, in the current environment balances the impact of short-term and mid-term factors, risks to inflation, to the economy and to financial stability, she said.

She said that the key rate decision has been made in conjunction with other measures of the central bank aimed at mitigating risks to the economy and supporting Russian citizens in difficult conditions.

These measures, according to Nabiullina, are designed to ensure financial stability and maintain the financial sector’s ability to provide loans to the economy, especially to those individuals and businesses that are especially vulnerable in the created situation.