Russian Central Bank keeps refinancing rate unchanged at 8,25%

The Board of Director of the Central Bank of Russia (CBR) had a meeting on Tuesday, April 2, and made a decision to keep unchanged its refinancing rate at 8.25 percent, it decided to reduce the rates on some long-term refinancing operations by 0.25 percentage points starting from Wednesday, April 3, the Central Bank’s Department of External and Public Relations said in its statement. Besides, the bank kept other key rates on its operations unchanged, including the weekly REPO rate, the statement underlined. The current decision was made upon the assessment of the inflation risks and prospects for the economic growth. The decline in the aforesaid interest rates will not affect the monetary market’s interest rates, but this step is expected to strengthen the efficiency of the transmission mechanism of the monetary-and-credit policy. According to the CBR, the year-to-year growth of consumer prices continued exceeding the targeted level and amounted to 7.2 percent as of March 25. The high level of the consumer inflation rate was mainly caused by the hike in the food prices and the dynamics of some regulated prices and tariffs. The maintaining of the inflation rate above the targeted range within rather a long period of time may have a bearing on the economy entities’ expectations and may become a source of higher risks, especially with due account of the plans to raise tariffs of natural monopolies. In the mean time, the Central Bank’s forecasts that the inflation rates are able to return to the targeted range in the second half of the year owing to the present-day trends of the monetary policy, current stable inflation expectation and the absence of negative shocks on the food market. The dynamics of major macroeconomic indicators in February 2013 pointed to the maintaining trend for a certain slowdown of the economic growth with higher risks of its hindering. The annual rates of the capital investment increase remained at a low level. The industrial production continued decreasing, while the retail trade turnover went down too. In the meantime, CBR points to a gradual worsening of the tone of the economy’s entities. In addition, the labour market’s current status and the crediting dynamics are able to create favourable conditions of the support of the domestic demand, the document underlined. The Central Bank will continue monitoring inflation risks and economy cooling risks. While making its decisions, the bank will take into account the inflation targets and forecasts of the economic growth. The Central Bank’s Board of Directors is expected to convene for its next meeting in the first half of May 2013 to consider the most topical aspects of the monetary-and-credit policy. According to analytical experts’ opinion, the Central Bank of Russian decided to keep its rates at the current level due to the existing inflation risks. “The decision made is rather expectable. [Bank’s president] Ignatyev remains in office, therefore the regulator continues keeping a conservative monetary policy, which is supported, in turn, by high inflation risks,” IFK Solid Senior Analyst Artur Akhmetov told Itar-Tass. In his opinion, “a negative affect from possible growth of prices may overtop the hike in crediting, which can explain Central Bank’s such moderate steps in the use of the core rate instrument.” “In the previous two months, the industrial output demonstrated a downward dynamics, dropping to 2.1 percent in February as compared to the same month of 2012, which points to the continued reduction of the economic growth in the country,” Promsvyazbank analytical expert Anton Zakharov told Itar-Tass, commenting on the Central Bank’s decision. With due account of the PMI index for industry, which was published by the Markit company on Monday, he is confident that further decrease of the interest rates may continue. The index went down to 50.8 points in March from the February level of 52 points, he said. Previously, the Central Bank of Russia changed its refinancing rate in September 2012. Back then the Board of Directors made a decision to raise the indicator by 0.25 points to the current level of 8.25 percent as of September 14, 2012.