Russian central bank holds rates, says tight policy to continue
MOSCOW: The Russian central bank left its main lending rate at 11 percent on Friday, sending a relatively hawkish signal about its willingness to persist with moderately tight monetary policy despite signs of a stabilizing economy.
Analysts had predicted no change in rates given the bank's tough anti-inflation rhetoric. But most had also expected the bank to soften its rhetoric, given a recent uplift in global oil prices that has buoyed the rouble, helping to mitigate inflation concerns. The bank's rhetoric remained relatively tough however, giving few grounds to expect imminent rate cuts.
"To enable the accomplishment of inflation targets, the Bank of Russia may conduct its moderately tight monetary policy for a more prolonged time than previously planned," it said in a statement.
Absent was a phrase inserted at the time of its last meeting in January, which had warned that "the Bank of Russia cannot rule out a tightening of its monetary policy".
But contrary to the expectations of some analysts, the bank did not reintroduce a phrase - removed in January - holding out the prospect of a rate cut. "Despite certain stabilization in financial and commodity markets and a slowdown in inflation, inflation risks remain high," the bank said.
It nevertheless said inflation was expected to continue on a downward trend, falling below 6 percent by March 2017 and reaching the bank's 4 percent target by the end of 2017.
There might be a temporary pick-up in inflation in mid2016, because of a low base effect, it warned.
There were also risks inflation might miss the end-2017 target, it said, citing unstable global oil and food prices and uncertainties about regulated prices in Russia and the state of the federal budget. The bank predicted the economy would contract by 1.3-1.5 percent in 2016. But it also struck a positive note, saying the weaker rouble was helping several sectors and softening the blow of low commodity prices. "Macroeconomic fundamentals ... suggest a less severe downturn than previously estimated considering this level of oil prices," it said.