Central Bank of the Russian Federation

February 17, 2014

The Board of Directors affirmed that its key macroeconomic interest rate would continue at 5.5%, the level since the rate structure was clarified last September 13 to lend more transparency to monetary policymaking.

In the statement explaining the reasons for keeping the present policy stance in spite of above-target inflation, the Board observed

Factors that led to acceleration of inflation at the end of 2013 are expected to exhaust their influence in the first half of 2014. Amid slow recovery of external demand and weak investment activity, the aggregate output of goods and services will remain below potential. This factor will contribute to a decrease in the consumer price growth rate. Slow growth rates in monetary aggregates formed in 2012 and persisted in 2013 will also contain inflation in 2014. Based on the above specified trends and given the current key rate level, the Bank of Russia expects the downward trend in consumer price growth to continue with inflation rate converging to the target level of 5.0% in late 2014.

The possibility of ruble depreciation is cited as an inflation risk factor.  Should this or other developments cause inflation to be higher than assumed, “the Bank of Russia will be ready to tighten its monetary policy.”

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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