Central Bank of Russia

January 29, 2016

Russia’s key interest rate was left at 11.0%, its level since a 50-basis point reduction last July.  At the end of 2014, the rate stood at 17% in an effort to contain inflation and ruble depreciation.  In 2015, the rate was cut 200 basis points in January, 100 bps in March 150 bps in April, 100 bps in June and 50 bps in July.

A released statement observes that although CPI inflation was at 12.9% at the end of last year, the substantial cheapening of oil prices, which in Russia’s case also points to a weaker growth outlook, means that inflation ought to fall below 7% a year from now and to 4% by late 2017.  The statement concludes with an acknowledgement of upside inflation risks and a declaration that monetary policy will be tightened if that happens.

should oil prices remain persistently low, this will further escalate inflation and financial stability risks and will require a more extensive adjustment of the economy to the new conditions. A continued persistence of high inflation expectations may also hamper the slowdown of consumer price growth. A well-balanced fiscal policy will be required to mitigate these risks in the medium term.  Should inflation risks amplify, the Bank of Russia cannot rule out a tightening of its monetary policy.

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



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