Key Russian Central Bank Rate Kept at 11.0%

April 29, 2016

The Central Bank of Russia’s Board of Directors projects a drop of CPI inflation from 7.3% currently to 5% a year from now and the 4.0% target by end-2017.  But officials want to be more confident of this path before resuming last year’s easing that saw a series of cuts over the first seven months of the year from 17.0% to the current level of 11.0%.  A statement was released enumerating upside inflation risks despite a recent drop in both actual and expected inflation.

These primarily stem from slowly declining inflation expectations against the inflation target, mixed data on movements being observed in nominal wages, uncertainty in parameters of further wages and pensions indexation, and from the absence of mid-term budget consolidation strategy. Due to the continued supply glut in the oil market, the risks of crude prices dropping and their negative pressure on exchange rate and inflation expectations remain high enough.

Officials expect Russia to emerge from recession sometime between mid-2016 and early 2017.

Copyright 2016, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.

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