Russia Monetary Policy July 2017


Russia: Bank Rossii holds key rate at 9.00%

July 28, 2017

Russia’s Central Bank (CBR) paused its easing cycle on 28 July and decided to hold the key rate unchanged at 9.00%. The move follows three consecutive rate cuts and met market analysts’ expectations.

The Bank’s decision signals a cautious stance as risks to the inflation outlook have risen, despite an improving economic backdrop. While inflation is hovering near the Bank’s target, risks of price pressures rising going forward linger chiefly due to volatility in global commodity and financial markets, as well as the possibility of new sanctions on the Russian economy. The Bank stressed that the moderately tight monetary stance is appropriate given medium-term risks to the inflation outlook but refrained from changing its projections for the economy.

In the accompanying statement, the Bank signaled that it would return to its easing cycle in the coming months stating that, “[it] sees room for cutting the key rate in the second half of 2017.” The evolution of geopolitical events, food prices and inflation dynamics will be critical to the Bank’s coming moves. The next monetary policy meeting is scheduled for 15 September.

The analysts we surveyed this month expect the Central Bank to continue cutting interest rates in the coming months and forecast the interest rate to end this year at 8.08%. Economists see the Central Bank lowering the monetary policy rate further in 2018, with an average Consensus of 6.93%.

Author: Angela Bouzanis, Senior Economist

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