Meanwhile, the tendency to increase prices was down quarter-on-quarter as implied by the diffusion indices for core indicators, while our alternative core inflation indicators posted a more solid decline. In conclusion, considering all indicators capturing the underlying trend and the pricing behavior, I would like to say that underlying inflation continued to improve in the third quarter. Esteemed Guests, Economic activity slowed in the second quarter as we predicted in the July Inflation Report. The GDP grew by 0.3 and 3.1 percent in quarter-on-quarter and year-on-year terms, respectively (Chart 12). We observe that the main driver of annual growth was final domestic demand, whereas net exports provided more negative contribution to growth due to the tourism slump (Chart 13). The contribution of final domestic demand to growth has been through both public and private consumer spending, while investments remain subdued. Public spending provided a large (1.7 points) contribution to growth as in the first quarter. On the other hand, value added gains were limited in industrial and services sectors with strong linkages to tourism. 6 / 10  BIS central bankers' speeches  Indicators for the third quarter of 2016 point to further deceleration in economic activity. In addition to the deepening tourism slump, the mid-July domestic turbulence and working day losses due to religious holidays dampened production activities. Therefore, although the sharp drop in July’s industrial production was offset by a rapid recovery in August, we expect production to fall below the second-quarter level in the third quarter.

Nominal interest rates on loans and deposits are rising. However, given the current level of inflation and inflation expectations, monetary conditions remain neutral in the meantime. This is evidenced by the persistently high growth rates in lending, as well as the still slow rise in deposits. Businesses and households continue to demonstrate high demand for loans. Nonetheless, the increase in unsecured consumer lending has started to slow down, which was promoted by additional macroprudential limits on high risk loans imposed on 1 October. As regards ruble-denominated time deposits, their growth in November—the first ten days of December continued, but its pace is still as slow as in October. On the one hand, higher interest rates make time deposits a more attractive savings instrument. On the other hand, banks artificially limit depositors’ opportunities to use these new, more profitable offers. Banks offer different deposit terms for the so-called ‘old’ and ‘new’ money. There are barriers in the form of fees that depositors need to pay to transfer their funds from one bank into another. We believe that such differentiation, or to be more exact, discrimination is inappropriate and have already proposed a number of initiatives to eliminate it. We hope that legislative authorities will support 2/4  BIS central bankers' speeches  our ideas. This will not only protect bank customers’ rights, but will also make the deposit channel of the monetary policy transmission mechanism more efficient in the future. Speaking of risks, proinflationary ones still prevail.