Central Bank of the Federation of Russia

September 16, 2016

The Bank of Russia as expected reduced its policy interest rate to 10.0% from 10.5%. This was the second cut of 2016 following a similarly sized reduction in June. In 2015, central bank rate cuts in January, March, April, June and July totaled seven percentage points. Monetary officials released a statement after their meeting calling for a wait and see period for the rest of this year but leaving open the door for more relief in the first half of 2017. Inflation and expected inflation have moved lower. However, domestically derived inflation has proven sticky, so caution and continuing imposition of a moderately tight monetary policy stance is advised to see if inflation does in fact drop to 4.5% a year from now and 4.0% by end-2017, which officials are projecting, from 6.6% currently. The ruble remains vulnerable, even though its greater stability recently is largely responsible for improved inflation since the first 2016 rate cut at the beginning of this summer.

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



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