Russia Monetary Policy


Putin choses Nabiullina as new Central Bank head as monetary authorities suggest more dovish stance

At its latest policy meeting on 15 March, the Central Bank left the refinancing rate unchanged at 8.25%, in a move expected by market analysts. Simultaneously, the Central Bank left the overnight deposit rate unchanged at 4.50% and the overnight repurchase rate at 6.50%.

In the accompanying statement, monetary authorities expressed a more pronounced concern regarding the economic outlook. According to the Central Bank, recent indicators point to a continuing slowdown in economic activity. Regarding price developments, the Bank continues to expect inflation to remain above the Bank's 5.0%-6.0% target range during the first half of 2013.

Finally, monetary authorities modified the phrasing regarding the appropriateness of the current monetary policy stance, dropping the usual reference to a specific time horizon. According to analysts, this change in tone represents a shift in the Central Bank towards a more dovish stance, which could eventually result in policy easing if economic data surprise on the downside.

Meanwhile, on 12 March, President Vladimir Putin named former Economy Minister and 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. The nomination of a long-standing Putin ally has raised concerns regarding the independence of the Russian Central Bank and its commitment to fight inflation, after the government has been calling for a reduction in interest rates in recent months.

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