Bank of Russia plans to return to neutral key rate of 5-6% in three years

How soon the regulator will return to the neutral key rate depends on the inflation rate.
The Bank of Russia plans to return to the neutral key rate of 5-6% within three years, the banks Chief Elvira Nabiullina said at the annual meeting of bankers with the management of the regulator.
"In the foreseeable period, which is three years for us, we will return to the neutral rate," she said, recalling that the neutral rate is 5-6%.
How soon the regulator will return to the neutral key rate depends on the inflation rate. At the moment, disinflationary factors are already prevailing.
According to the head of the Bank of Russia, the level of the key rate affects business models, and many banks began to point at the fact that it is difficult to maintain margins under low rates.
"Let me remind you that a few years ago everyone said: "Let's cut rates, we will issue more loans." It is clear that rates affect not only the active participation of banks' balance sheets, but also the passive one," she said.
Nabiullina added that in conditions of low interest rates on deposits, more and more bank customers are switching to the stock market, and in this case, the regulator recommends that banks listen to the needs of the client.
"The client wants complex services, not only to get a loan, but wants to serve small and medium-sized businesses, various payment services. To maintain stability, you need to think about customer focus in order to keep them within the banks. Therefore, digitalization of business models becomes not only the fate of large banks, but also regional and small banks," the head of the Bank of Russia said.
On February 12, at its first meeting in 2021, the Board of Directors of the Bank of Russia once again kept the key rate at 4.25% per annum.


Source: https://tass.com/economy/1258037