(Adds Nabiullina quotes and context)
MOSCOW, April 7 (Reuters) - Russian central bank governor Elvira Nabiullina said on Tuesday she expected a rapid decline in inflation, and that the banking sector was strong enough to weather financial difficulties.
“The acceleration of inflation... has in our view a temporary character. We expect quite a rapid fall in inflation if there are no new unforeseen circumstances,” she told a banking conference in Moscow.
Inflation hit a 13-year high of 16.9 percent in March, following a rapid decline in the rouble late last year, but in recent weeks inflation has shown signs of stabilising as the rouble strengthens.
Nabiullina said the central bank would continue cutting interest rates insofar as inflation risks receded. The bank has already cut rates twice this year.
She also expressed confidence that the country’s banks could weather the financial crisis, although rising bad loans represented a risk.
“On the whole we judge the situation in the banking sector as stable,” she said. “The banking sector maintains a substantial capital buffer and the banking sector is able to counter serious shocks even if crisis phenomena deepen.”
She said central bank stress tests showed that even if the oil price were to fall to $40 per barrel the sector would maintain capital levels above the regulatory minimum.
Nabiullina also said the factors which had been weighing on the rouble had now passed, saying that repayments of foreign debts could be financed without this having a significant effect on the rouble’s value.
“Thus the influence of those factors which were influencing the exchange rate and inflation last year are gradually receding to nothing,” she said. (Reporting by Elena Fabrichnaya and Oksana Kobzeva, writing by Jason Bush, editing by Timothy Heritage)