The longer the trade dispute between the U.S. and China continues, the bigger chances of this turning into a structural problem for the global economy, according to the Governor of the Central Bank of Russia, Elvira Nabiullina.
Speaking to CNBC at the IMF Annual Meeting in Washington D.C., Nabiullina said that if the trade war could be resolved "constructively and fast," markets could treat the slowdown as cyclical, but any escalation posed a greater long-term risk to the global economy.
"In this case, monetary policy can do little to address structural weaknesses in the global economy," she told CNBC's Geoff Cutmore, adding that aggressive monetary policy evening could "aggravate financial risk stability issues, especially in emerging markets."
The World Bank on Wednesday lowered its Russian economic growth forecast for 2019 from 1.2% to 1%, a fourth downward revision for the country's economic outlook this year.
The Central Bank of Russia lowered its GDP (gross domestic product) growth outlook to 0.8-1.3% last month, and Nabiullina said that while global factors were weighing on the Russian economy, the domestic picture was beginning to look more positive.
"The growth in our main trade partners, China and the EU, is slowing down, so Russian export has slowed down as well, and it's one of the main external factors that caused deceleration of the Russian economy in the first half of this year," she said.
The latest round of trade talks between the U.S. and China ended last week with the promise to begin "phase one" of a partial trade deal. However, China's Ministry of Commerce spokesman Gao Feng said on Thursday that the U.S. must remove tariffs on Chinese goods if a final agreement is to be reached.
He did not confirm when a "phase one" agreement would be signed or whether trade officials planned to meet again, though U.S. Treasury Secretary Steven Mnuchin has expressed willingness to travel to Beijing for further talks.
The Russian government increased the country's general VAT rate from 18% to 20% at the start of the year in a bid to create fiscal room to finance national projects, but Nabiullina said unexpected delays in public spending projects had restrained the government's fiscal policy plans, which had been accompanied by a tightening of monetary policy.
"We have tightened our monetary policy as a response to pro-inflationary factors such as the VAT increase to avoid secondary effects in a situation where inflation expectations are not anchored," Nabiullina said.
The central bank in September cut its key interest rate by 25 basis points to 7% per annum, however, and indicated it could cut further at its next policy meeting on October 25. Nabiullina said public spending was getting "more on track."
"We think that budget policy will have a more stimulative stance and the normalization of our monetary policy will have additional positive effects on growth," she said, adding that Russian GDP growth should return to 1.5-2% in 2020.