Russia Monetary Policy October 2016

Russia

Russia: Bank Rossii holds rates in October as expected

At its 28 October monetary policy meeting, the Russian Central Bank decided to hold the one-week repo rate at 10.00%, a decision that was in line with market expectations. The Bank had indicated that it would hold rates at its previous monetary policy meeting, when it slashed interest rates for the second time this year.

In the accompanying statement, the authorities stated that holding interest rates was consistent with the Bank’s targets. Growth and inflation dynamics are progressing as expected, and a tight monetary policy is still needed for the slowdown in price pressures to be sustainable. The Bank emphasized that the recent downward trend in inflation is in part due to temporary factors such as the recent strength in the ruble. Bank Rossii sees inflation dropping to its target of 4% by the end of next year.

Looking forward, the Bank stated that the current level of the interest rate will be maintained through the end of the year. However, the Bank estimated that a cut could be made in H1 2017 depending on the evolution of price pressures. The next monetary policy meeting is scheduled for 16 December.

Since the Central Bank signaled that it will pause the easing cycle until H1 2017, the analysts we surveyed this month expect the interest rate to end this year at 10.00%. Next year, analysts expect the Central to resume the easing cycle and see the monetary policy rate ending the year with an average Consensus of 8.11%.


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Russia Monetary Policy Chart


Russia Monetary Policy October 2016 0

Note: 1-Week Repo rate in %.
Source: Central Bank of the Russian Federation (CBR).


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