Russia Monetary Policy


Central Bank maintains refinancing rate but raises deposit rate

On 30 May, the Central Bank decided to leave the refinancing rate unchanged at 8.25%, but lifted the overnight deposit rate by 25 basis points, from 3.25% to 3.50%. The move defied market expectations that the Central Bank would leave both the refinancing rate and the deposit rate unchanged. The overnight deposit rate constitutes the lower bound of the policy rate corridor - the higher bound being the repo rate - used by the Central Bank to influence rates in the interbank overnight lending market. In the accompanying statement, the Central Bank highlighted a situation of excess liquidity in the banking sector. According to analysts, the move is therefore designed to prevent overheating in bank lending, which would fan inflationary pressures. Finally, the Central Bank stated that the current policy stance provides a balance between avoiding a pick-up in inflation and supporting economic growth for the coming months.

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