elvira nabiullina : recent russian economic developments and bank of russia ’ s forecast statement by ms elvira nabiullina, governor of the bank of russia, in follow - up of board of directors meeting, moscow, 13 march 2015. * * * good afternoon! today the bank of russia board of directors decided to reduce the key rate from 15. 00 % to 14 % per annum. this decision takes into account the following main factors. first, the latest data on the economic situation show that the balance of risks remains shifted towards the weakening of the economy rather than acceleration of inflation. january data and february leading indicators, primarily business sentiment indices, indicate that the economic situation continues to deteriorate and this trend may persist until 2016 q1. seasonally adjusted unemployment fell to 5. 0 %. it should be taken into consideration that the russian labour market traditionally adjusts, at least at the first stage, through wage rates and part - time employment, whose dynamics is indicative of lower demand for labour. at the same time, shrinkage of consumer demand will have a downward pressure on inflation. second, monthly inflation slowed down considerably in february following the surge in late december - january. and weekly march data indicate that this process continues. the current high level of annual price growth is explained by the supply - side factors – decline in the ruble exchange rate and imposed trade restrictions. these are one - time factors, and in case there are no new considerable shocks their impact on monthly and quarterly inflation will decrease over the next months. the annual inflation, which to a large extend reflects past price dynamics, can keep rising up to the middle of the year. however, in a year, i. e. in march 2016, inflation will slow down to the level of about 9 % amid the decrease in the monthly and quarterly price growth. while making the decisions regarding interest rates, we take into consideration not the current inflation that is essentially historical, and cannot be affected by our decision. we rely on inflation forecast. third, we forecast gradual decrease in inflation expectations. surveys already show evident signs of such a decline. in case no new shocks occur, this process will persist facilitated by the slowdown in current inflation. therefore, real interest rates which should be calculated with regard to the expected inflation will stay in the positive range providing for antiinflationary nature of monetary policy. nevertheless, it is persistently high inflation expectations, as well as risks of the upward revision of tariffs of

clearer. european experience shows that the best contribution monetary policy can make to balanced growth and development in the longer term is to safeguard price stability. price stability provides a fixed framework for the long - term strategies of both business enterprises and consumers. in practice, price stability means very low inflation in the range of 2 per cent. for this reason, the maastricht treaty makes price stability a direct objective of the european central bank. the same applies to a number of central banks in non - european countries as well as the uk, sweden and norway. the fact that the central bank ’ s objective is price stability does not prevent short - term aspects of the significance of the interest rate to employment from being taken into account, but only in situations where this does not conflict with the objective of price stability. as will be known, danish monetary policy is related closely to that of the euro area. in a more indirect way, our objective is also price stability, since in order to maintain a stable exchange rate our inflation must not deviate significantly from inflation in the euro area. since world war ii, denmark has pursued a fixed - exchange - rate policy in various guises, with varying degrees of firmness. denmark reaped favourable experience from its consistent fixed - exchange - rate policy in the 1980s and 1990s. in fact, denmark is a good example of how for a number of years it has been possible to reconcile high employment, rising real wages, low inflation and a favourable balance of payments with the help of an economic policy based predominantly on structural changes, and not on short - term cyclical policies. as a consequence, when the euro was introduced, denmark decided to continue its fixed - exchangerate policy with a narrow linking of the krone to the euro. the official danish interest rate is therefore earmarked to influence the exchange - rate development. fortunately, denmark ’ s economy has proved to be so robust in recent years that confidence in the krone ’ s stability has increased significantly. the foreign - exchange market is thus currently extremely stable. formerly, the mortgage - credit market was dominated completely by fixed - rate loans. once a loan had been raised, private home owners were not affected by increasing interest rates. so when a home changed hands, the focus was on the mortgage payments for the first year. an alternative from the end of the 1990s has been adjustable - rate mortgage loans. since then, this area has been subject to extensive product development and marketing. it is very positive to note