More Dovish Tone in Latest Statement from Central Bank of the Russian Federation

April 2, 2013

The Russian refinancing rate was left unchanged at 8.25%, its level since last September.  In three ways, however, an increased possibility of a cut later in 2013 was conveyed.

  1. The central bank’s Board of Directors voted “to reduce effective from 3 April 2013 the interest rates on certain longer-term refinancing operations by 0.25 percentage points.”
  2. Greater confidence was expressed that CPI inflation, now above 7.0%, will be back in the 5-6% target range during the second half of this year.  “According to the Bank of Russia projections based on the assumptions of maintaining the current monetary policy stance, stable inflation expectations and absent adverse food prices shocks, the rate of inflation will return to the target range in the second half of 2013.”
  3. Greater worry about future economic growth was another theme of today’s statement.  “Key macroeconomic indicators in February 2013 pointed to a continuing deceleration of economic growth and increased risks of economy slowing down. The growth rates of investment in production capacity remained subdued. The decrease in retail sales growth and industrial production continued. Against this background, economic confidence indicators are gradually deteriorating.”

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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