Bank Rossii: Policy Unchanged

November 12, 2012

Russia’s central bank has changed rates just once this year, a 25-basis point increase of the refinancing rate in September to 8.25% that reversed a similarly-sized cut last December.  The single tightening came in response to concerns that elevated inflation could boost expected inflation and to make sure that didn’t happen.  After the October meeting, policy was not tightened further, but officials warned, “the continued increase in the core inflation rate implies that inflation is spreading to other consumer market segments, while, according to the Bank of Russia estimates, significant demand-pull price pressures are absent.”  Bank Rossii officials met again last week, left policy unchanged, but this time expressed less dissatisfaction over the outlook for inflation.

The deceleration of certain food prices growth and the September 2012 hike in the interest rates on the Bank of Russia monetary policy instruments could contribute to the moderation of inflation expectations. At the same time significant demand-pull price pressures are absent.

Since the economy has slowed, it’s reasonable to expect conventional demand-driven inflation to abate.  Third-quarter Russian GDP, released today, posted decelerated on-year growth of 2.9% in 3Q, down from 4.0% in the second quarter and 4.9% in the first quarter.  Growth in 2013 is likely to be around 3.5%.  A change of policy during the immediate months ahead does not seems likely.

Copyright 2012, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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