Bank of Russia

December 16, 2016

Monetary officials left Russia’s key central bank interest rate at 10.0% and released a report that was more equivocating than prior reports about how soon the rate can be lowered further. Actual inflation is behaving as assumed, but expected inflation is higher than hoped. A number of inflation risk factors are mentioned.

The restraining effect of domestic demand, moderate growth in producer prices and relatively stable exchange rate dynamics will be conducive to inflation slowing down to the 4% target in late 2017.  … Should the risk scenario or any of the indicated inflation risks materialise, the Bank of Russia will have to pursue a tighter monetary policy than the one envisaged in the baseline scenario. As the trend towards a sustainable decline in consumer price growth takes root, the Bank of Russia will consider an opportunity of cutting the key rate in the first half of 2017. Monetary conditions will continue to be moderately tight for a rather long period, thus creating prerequisites for the balanced approach of economic agents to borrowing and consumption and facilitating a further reduction in inflation and inflation expectations.

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



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