Monetary policy
guidelines for 2021–2023

Principles and goals

The Bank of Russia is following the inflation targeting regime. Its goal is to maintain price stability, that is, to keep annual inflation close to 4% on a continuous basis.

Low and predictable inflation is critical for households and businesses to make long-term plans, protects savings, incomes and investment against unforeseeable devaluation, helps reduce interest rates in the economy, and increases the affordability of borrowing.

Principles underlying Bank of Russia monetary policy are unchanged

Publicly announced inflation target

Key rate and communication as monetary policy instruments

Forecast-based decisions

Communication transparency


Baseline scenario

The baseline scenario assumes a relatively active recovery in consumer demand, budget consolidation and the return of federal budget parameters to the values of the fiscal rule in 2022, and moderate effects from the pandemic for the economy’s potential. Under the baseline scenario, monetary policy will likely remain accommodative in 2021 and will afterwards gradually return to the neutral policy in the second half of the forecast range, as inflation stabilises at the target.

Annual inflation  
Gross domestic product  
Banking system claims on the economy in rubles and foreign currency  
 – corporates  
 – households  
growth, % YoY
2019 (actual) 2020 2021 2022 2023
3 3.7–4.2 3.5–4.0 4.0 4.0
1.3 -(4.5–5.5) 3.5–4.5 2.5–3.5 2.0–3.0
10.1 6–9 7–11 7–11 7–11
7.1 6–9 6–10 6–10 6–10
19 6–9 10–14 10–14 10–14

The Bank of Russia presents 3 alternative scenarios:

Disinflationary scenario

Disinflationary scenario suggests the markedly slower rate (compared to the baseline scenario) of demand recovery which may take place if the pandemic continues and a significant volume of restrictive measures remain in place. The long period of moderate demand will exert a downward pressure on inflation. It will call for monetary policy remaining accommodative for longer period of time and, possibly, for its further easing in order to return inflation to the target

Pro-inflationary scenario

The proinflationary scenario assumes that demand dynamics will be similar to the assumptions of the baseline scenario but in the context of a significant decline in the economy’s potential. It also proceeds from the scenario assumption that the process of budget consolidation may take more time, ending in 2023. In this situation, the economy will return to a lower potential as early as in 2021 and will even slightly exceed it. In order to maintain inflation at the target – close to 4% – the Bank of Russia may need to temporarily shift to a moderately tight policy followed by a further return to the neutral one at the end of the forecast horizon.

Risk scenario

The risk scenario assumes both a weak recovery in demand and a considerable decline in the economy’s potential. Additional risks for this scenario will be the threat of a potential large-scale credit crisis in countries with a high public debt and the escalation of geopolitical risks. Considerable increase in pro-inflationary risks will require a temporary and significant tightening of monetary policy and its return to the accommodative stance in the second part of the forecast period. Due to a large scale of events under this scenario, the process of inflation stabilisation at the target will take more time and will occur slightly later than 2023.

Monetary policy in 2019 H2 – 2020

Gradual key rate reduction in September 2019 – February 2020

TThe Bank of Russia continued easing its monetary policy. Overall, the key rate was cut from 7.25% to 6.00% per annum over the said period. This was needed to stabilise inflation close to 4% over the forecast horizon. During these months, inflation was slowing down faster than it had been forecast.

Key rate decrease paused in March 2020

By March, the situation in the global and Russian economies, as well as in global financial markets substantially deteriorated. Financial stability risks were up. Uncertainty about further developments increased considerably. In view of such a situation, the Bank of Russia made a decision to pause the key rate reduction.

Further significant key rate decrease since April 2020 and a shift to accommodative monetary policy

The slump in external and domestic demand intensified the risks of a substantial deviation of inflation away from the target. In order to limit these risks, the Bank of Russia switched to accommodative policy. In April – July, the key rate was cut from 6.00% to 4.25% per annum. Making its key rate decisions, the Bank of Russia took into account the stabilisation measures implemented by the Government, as well as by the Bank of Russia in other areas of its activity.

Future monetary policy

In the case of the baseline scenario, as the economic situation returns to normal and inflation stabilises close to 4%, the Bank of Russia will estimate a possible time and pace for returning from accommodative to neutral monetary policy where the key rate will stay within a neutral range of 5–6% per annum.

Expansion of communication

Due to rising uncertainty, the clarity of communication and the openness of the central bank are gaining significance. To be able to address new challenges, the Bank of Russia has taken a number of new steps.

Increase in the number of press conferences

The Bank of Russia started to hold the Governor’s press conferences after each key rate meeting.

Expanded regional communication

In September, the Bank of Russia will launch the publication of information and analytical commentaries about inflation in all Russian regions. This will enable households to have information about the specifics of price trends in their regions. In 2021 Q1, Bank of Russia regional branches will start the publication of the consolidated review of the current economic situation in their regions.

Expanded communication of the forecast

The Bank of Russia is discussing formats for more detailed communication of our forecast. Based on these discussions, we are going to publish the forecast in a more expanded format, including options for publishing the projected path of the key rate.

Use of monetary policy instruments

The operational objective of the Bank of Russia’s monetary policy is to keep overnight money market rates close to the key rate. In 2020, they have been forming close to the key rate, prevalently in the lower half of the Bank of Russia interest rate corridor.

The Bank of Russia continued to operate amid a structural liquidity surplus. It is expected to remain over the three-year horizon.