Nabiullina's statements on February 14: freezing of deposits, a wave of bankruptcies and a rate trend

After the meeting of the Board of Directors of the Central Bank of Russia on maintaining the key rate at 21%, lending to individuals and legal entities, forecasting the cost of a barrel of oil, inflation expectations and GDP for the coming years, the head of the Bank of Russia Elvira Nabiullina held a press conference at which she made several important statements.

Nabiullina answered the question of concern to many about the possible freezing of deposits. According to her, the Bank of Russia is not considering such an initiative, as it does not have such powers. Plus, he doesn't need them.

"The Bank of Russia does not have such powers under the law, no. In addition, these powers are absolutely unnecessary. As I have already said, this is nonsense," Nabiullina answered the question about the regulator's mandate to freeze deposits in commercial banks.

Elvira Sakhipzadovna also told when the peak of annual inflation will happen in the country. According to her, this will happen in April-May.

"Inflation is unacceptably high now. As for our inflation forecasts, we have raised our inflation forecast for this year. There are different indicators here. There is annual inflation, the one that measures inflation over the past 12 months… And this indicator of annual inflation depends on how much the base of last year will go out. According to our estimates, the peak will be in April-May ... annual inflation," Nabiullina said.

In addition, the regulator's economists do not expect a wave of bankruptcies of companies due to the high key rate in the country. In general, the domestic business, according to her, is characterized by general financial stability.

"Russian business remains financially stable, now only small and medium—sized businesses have an increase in the number of applications for restructuring," Nabiullina added.

The Ukrainian issue also appeared at the press conference. According to the head of the regulator, the possibility of resolving the conflict on Ukraine is not included in the basic macro scenario. At least not yet.

"In the basic scenario, we do not have this factor yet, it seems to me premature to include it in the scenario, especially in the basic one. Everything will depend on the situation, now it seems to me impossible to accurately calculate the impact on the economy, inflation," Nabiullina said.

Commenting on the latest decision on the key rate, the head of the Central Bank of Russia noted that the Board of Directors considered the possibility of raising it, but not reducing it.

"No, we did not discuss a rate cut, we discussed two options: keeping the rate and raising the rate. Rate reduction horizon… Well, you probably saw, paid attention to our forecast of the key rate and the interval that we gave. It assumes both a possible rate cut this year and a possible rate hike this year. It all depends on how the trend is formed," the economist said.

At the same time, Elvira Nabiullina sees every reason for an early reduction in the overheating of the Russian economy. This will be facilitated by the accumulation of the effects of tightening monetary policy.

"We expect that as the effects of tightening monetary conditions and normalizing fiscal policy accumulate, overheating will gradually decrease. In total, economic growth in the next three years will be the same as we predicted in October," stated Elvira Sakhipzadovna.

Nabiullina believes that it will be possible to return to the issue of a possible increase in the key rate only if the current tough conditions are not enough to slow down inflation.

"If the gained rigidity is not enough, we will be ready to return to the issue of raising the rate at the next meeting," the economist confirmed.

But in general, there can be no talk of a reversal of the inflation trend so far, although price growth has slowed down: "Operational data on inflation in January and February indicate a slight slowdown in the current rate of price growth compared to the end of the year, but there is no talk of a trend reversal yet."