Russia Monetary Policy


Bank Rossii on hold, launches new floating-rate facility

At its 12 July policy meeting - the first chaired by Elvira Nabiullina - the Central Bank left the refinancing rate unchanged at 8.25%, a move expected by market analysts. However, Bank Rossii launched a new floating-rate lending facility for operations with a 12-month maturity, backed by non-marketable collateral and guarantees. The minimum rate is fixed at 5.75%, 25 basis points above the auction repo rate. The move is expected to boost liquidity, particularly for banks that lack eligible collateral to access one-week repo auctions. It is also expected to reduce the spread between short-term and longer-term rates and improve the transmission mechanism of Bank Rossii's monetary policy.

The decision comes amid a virtually unchanged economic assessment compared to that of the previous meeting that took place on 10 June. Bank officials reckon that recent indicators point to a moderation in economic growth and downside risks persist amidst weak investment activity and subdued external demand. Regarding price developments, Bank Rossii acknowledged the recent pick-up in inflation, largely explained by food prices and regulated tariffs, but it maintains its assessment that inflation will move back within its 5.0% to 6.0% target range in the second half of 2013.

In the final statement, monetary authorities once again did not refer to the appropriateness of the current monetary policy stance. According to analysts, the statement's phrasing suggests that the door remains open for a rate cut in the coming months, provided that inflation returns to a figure in line with Bank Rossii's target.

FocusEconomics Consensus Forecast panellists anticipate the refinancing rate to close the year at 7.77%. For 2014, the panel expects the rate to end the year at 7.46%.

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Russia Monetary Policy Chart

Russia Monetary Policy July 2013

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

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