MOSCOW, June 30 (Reuters) - The Russian central bank plans to hold a monetary policy review this year as the market development level upon which its 4% inflation target was based has changed over the past five years, Governor Elvira Nabiullina said on Wednesday.
The central bank’s comments on inflation and monetary policy are in focus ahead of a July 23 board meeting at which the bank is widely expected to raise its key interest rate for the fourth time this year.
Speaking at an online financial conference, Nabiullina said Russia had defined its inflation target at a particular level, not a range, as it feared that inflationary expectations would otherwise stick to the upper boundary of that range.
“The target level, in our view, matched the market development level, but it has somewhat changed over the time,” Nabiullina said.
The central bank has repeatedly said it has no immediate plans to change the 4% inflation target.
The Bank of Russia is struggling to rein in consumer inflation, its key area of responsibility, which shot above the target in November, exceeded 6% in June and shows little signs of slowing.
Inflation is a sensitive issue in Russia ahead of a parliamentary election in September, as it dents real incomes that were hurt by the COVID-19 pandemic.
The central bank has raised its key rate three times this year, most recently to 5.5% earlier this month, and promised to carry out more rate hikes to combat price growth.
Nabiullina said on Wednesday the central bank’s monetary policy response was needed to avoid an inflationary spiral in Russia, where the economy has already recovered to a pre-pandemic level.
The bank will consider raising its key rate by between 25 and 100 basis points in July, Nabiullina said earlier this week.
Higher rates help tame inflation by making lending more expensive and bank deposits more attractive. But tight monetary policy also restricts economic growth. (Reporting by Elena Fabrichnaya, Andrey Ostroukh and Alexander Marrow; Editing by Toby Chopra and Alex Richardson)