At the previous meeting on 16 September the Bank of Russia took a decision to reduce the key rate from 10.5% to 10%, after July 29, left her unchanged.
on 10 June, the Central Bank lowered the rate by 0.5 percentage points to 10.5%.
In six straight previous meetings, the Bank decided not to change the rate (11%): April 29, 2016 March 18, 2016, 29 Jan 2016 11 Dec 2015 October 30, 2015 and September 11, 2015
Till 11 Sep 2015 the Bank of Russia five times reduced rate of: January 30, 2015 – from 17% to 15%, 13 March 2015 from 15% to 14%, 30 April 2015 – from 14% to 12.5%, June 15, 2015 – from 12.5% to 11.5% on July 31, 2015 from 11.5% to 11%.
the Central Bank sharply raised the rate 16 December 2014 c 10.5% to 17% due to sharply rising prices and the devaluation of the ruble.
Full text of the Statement of the Central Bank of the Russian Federation.
the Board of Directors of the Bank of Russia 28 October 2016, has decided to keep the key rate unchanged at 10.00% APR. The Board of Directors notes that the dynamics of inflation and economic activity generally consistent with the forecast.
At the same time a significant contribution to the slowdown in consumer prices bring temporary factors, and the decline in inflation expectations remains fragile.
To consolidate the trend towards a sustainable reduction of inflation, according to Bank of Russia estimates, it is necessary to maintain the current level of the key rate until the end of 2016, with the possibility of its reduction in I-II quarter of 2017. Taking into account the adopted decisions and maintain a moderately tight monetary policy, the annual growth rate of consumer prices will be less than 4.5% in October 2017 and will fall to the target level of 4% at the end of 2017. When deciding on the key rate in the coming months, the Bank of Russia will assess inflation risks and compliance with the dynamics of the economy and inflation baseline forecast.
Taking a decision on the key rate, the Board of Directors of the Bank of Russia proceeded from the following.
First. Annual inflation continued to decline in the baseline forecast of the Bank of Russia, however, this is largely due to the influence of temporary factors. On 24 October the annual growth rate of consumer prices decreased to 6.2% after 6.4% in September.
a significant contribution to the reduction of inflation makes the dynamics of the ruble in the conditions of higher-than-expected oil prices and increased interest of foreign investors in Russian financial assets. In addition, a good harvest contributed to the slowdown in the growth of prices of food items.
the Disinflationary impact of domestic demand is gradually reduced, resulting in a slow decrease in growth rate of prices of non-food items.
households still prefer to stick to savings behavior. However, trend growth in real wages can contribute to the gradual recovery of demand for goods and services. Keeping the key rate at 10.00% APR for a sufficiently long time will continue to shape the monetary conditions required to maintain incentives for savings and consolidation of trends towards a sustainable slowdown of inflation is influenced by limitations on the demand side. This will create conditions for the further decrease in inflationary expectations. Taking into account the adopted decisions and maintain a moderately tight monetary policy, the Bank of Russia, annual inflation will be less than 4.5% in October 2017 and will further fall to the target level of 4% at the end of 2017.
Second. September signal the Bank of Russia about the future trajectory of key rates was focused on the adjustment of market expectations, which predicted a more rapid decline in the key interest rate at a slower further decrease of inflation, the Bank of Russia. The ad signal has contributed to the upward shift of the yield curve in the financial market.
However, the inflation expectations of market participants at the end of 2017 still exceed the inflation target of the Bank of Russia to 4%. Correction in interest rates in the financial market contributed to maintaining a moderately tight monetary conditions that will persist in the economy long enough.
Positive real interest rates would be maintained at a level that ensures that the demand for credit not leading to inflationary pressure and will maintain incentives for savings. Incipient signs of recovery of consumer credit not yet carry significant inflationary risks, given that significant part of loans is estimated to have been used for refinancing previously obtained loans.
Third. Recovery of industrial activity remains fragile. Retained its heterogeneity across industries and regions. According to the Bank of Russia, a moderately tight monetary conditions do not inhibit the recovery of economic activity, and the main restrictions lie in the structural region.
the labor Market adjusts to new economic conditions, the unemployment rate has remained at a stable low level. Continues the development of processes of import substitution and expansion of non-oil exports for some items, there is an additional point of growth in the industry, including in high-tech industries. At the same time, they cannot provide confident positive dynamics of production in General. At the same time there is stagnation or a slowdown in the growth of output in selected industries and the emerging signs of recovery in investment activity remains weak.
For the development and consolidation of positive trends need time. In General, for 2016, the production of goods and services will decrease on 0,5-0,7%, while in the fourth quarter it is expected a small positive quarterly GDP growth. In 2017, economic growth will be low — less than 1%. This forecast assumes conservative assumptions of a low rate of growth in the world economy, the average annual oil price of around USD 40 per barrel, a moderate outflow of capital and the preservation of the structural constraints of the Russian economy development.
Fourth. are the risks that inflation will not reach the target level of 4% in 2017. This is due primarily to inertia in inflation expectations, the possible weakening of incentives for household savings and the rise in real wages which is not accompanied by productivity growth. Not yet adopted legislative solutions in respect of specific measures of fiscal consolidation, including indexation of wages and social benefits in the medium term. Negative impact on exchange rate and inflation expectations may also have volatility in world commodity and financial markets.
To consolidate the trend towards a sustainable reduction of inflation, according to Bank of Russia estimates, it is necessary to maintain the current level of the key rate until the end of 2016, with the possibility of its reduction in I-II quarter of 2017. When deciding on the key rate in the coming months, the Bank of Russia will assess inflation risks and compliance with the dynamics of the economy and inflation baseline forecast.
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