Russia Monetary Policy


Bank Rossii cuts longer term rates, hints at future easing

At its latest policy meeting on 2 April, the Central Bank left the refinancing rate unchanged at 8.25%, in a move expected by market analysts. Simultaneously, the Bank left the overnight deposit rate unchanged at 4.50% and the overnight repurchase rate at 6.50%. However, Bank Rossii took some steps towards easing its policy stance by shaving off 25 basis points on all longer-term refinancing facilities (three to 12 months).

According to the accompanying statement, monetary authorities appear to be more concerned regarding the economic outlook, as indicators available point to a continuing deceleration in economic activity. The Bank is less worried regarding price developments, as they see inflation moving back inside the Bank's 5.0% - 6.0% target range in the second half of 2013.

Monetary authorities once again modified the phrasing of the final statement and dropped any reference to the appropriateness of the current monetary policy stance, which, according to analysts, represents a clear hint to policy easing in the next months. This interpretation corroborates analysts' belief that the Central Bank move on longer-term loan rates represents a response to government pressures to ease monetary conditions amid faltering economic growth.

The decision adds to raising concerns regarding the independence of the Russian Central Bank and its commitment to fighting inflation, following the recent nomination of former Economy Minister and President Vladimir Putin's chief economic aide Elvira Nabiullina as new Chairman of the Central Bank. Nabiullina, whose appointment needs to be ratified by the parliament, will take over from current Chairman Sergei Ignatyev in June.

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Russia Monetary Policy Chart

Russia Monetary Policy April 2013

Note: Refinancing rate in %.
Source: Central Bank of the Russian Federation (CBR).

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