Russia Monetary Policy


Central Bank moves to fight liquidity shortage

On 30 June, the Central Bank decided to leave the refinancing rate unchanged at 8.25%, in a move which was widely expected by market analysts. Meanwhile, the Central Bank unexpectedly cut the overnight repurchase rate by 25 basis points, from 5.50% to 5.25%, while simultaneously raising the overnight deposit rate by the same amount, from 3.50% to 3.75%. The overnight repurchase rate and deposit rate constitute respectively the higher and the lower bound of the policy rate corridor used by the Central Bank to influence rates in the inter-bank overnight lending market. According to the Central Bank, the decision will reduce interest rate volatility as banks begin to face tighter liquidity conditions. Meanwhile, the consumer prices continued to moderate (August: +8.2%; July: +9.0%), as a bump harvest drove down food prices. In the statement accompanying the decision, the Central Bank pointed out that the moderating trend in consumer prices will remain in place going forward. Accordingly, analysts believe that the Central Bank may start an easing cycle to stimulate the Russian economy in case of a pronounced slowdown in economic activity in the coming months.

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