Russia Monetary Policy March 2019

Russia: Central Bank holds key rate in March as expected

At its 22 March meeting, the Board of Directors of the Central Bank of the Russian Federation (CBR) held the key interest rate at 7.75%, as was expected by market analysts. The Bank has kept rates on hold this year after reversing course in H2 2018 when rates were hiked to stem inflationary pressures; this had followed a two-year easing cycle, designed to support the economic recovery. Notably, the Bank also struck a more dovish tone in its communiqué this month, suggesting that it could cut policy rates this year if events play out as expected.

The decision chiefly reflected lower-than-expected inflation readings at the start of 2019 and the abating of short-term risks to the price outlook. Notably, the Bank explained that the effect of the VAT increase on prices has largely materialized and that it added around 0.6-0.7 percentage points to inflation, which was at the lower end of the CBR’s expectation. Accordingly, the Bank revised down its inflation outlook and now sees inflation ending the year between 4.7–5.2% (previously: 5.0–5.5%). That said, there is still the risk that certain deferred effects of the VAT may add to price pressures.

Looking ahead, the Bank signaled that the key rate could be cut earlier than previously expected, stating that “if the situation develops in line with the baseline forecast, the Bank of Russia admits the possibility of turning to cutting the key rate in 2019.” The Bank also added that inflationary risks have moderated especially with regard to the VAT increase, food products and monetary tightening in the U.S. However, risks still lurk nonetheless, especially those related to volatility in oil prices and financial markets.

The next monetary policy meeting is scheduled for 26 April.

Free sample report

Access essential information in the shortest time possible. FocusEconomics provide hundreds of consensus forecast reports from the most reputable economic research authorities in the world.
Close Left Media Arrows Left Media Circles Right Media Arrows Right Media Circles Arrow Quote Wave Address Email Telephone Man in front of screen with line chart Document with bar chart and magnifying glass Application window with bar chart Target with arrow Line Chart Stopwatch Globe with arrows Document with bar chart in front of screen Bar chart with magnifying glass and dollar sign Lightbulb Document with bookmark Laptop with download icon Calendar Icon Nav Menu Arrow Arrow Right Long Icon Arrow Right Icon Chevron Right Icon Chevron Left Icon Briefcase Icon Linkedin In Icon Full Linkedin Icon Filter Facebook Linkedin Twitter Pinterest