The Board of Directors’ Decision on the Bank of Russia Key Rate (Unofficial translation)

On 8 November 2013 the Bank of Russia Board of Directors decided to maintain the Bank of Russia key rate at 5.50 percentage per annum.

The decision was based on the assessment of inflation risks and economic growth prospects.

The dynamics of the key macroeconomic indicators suggests that the pace of economic growth remains low. Production activity and investment demand remain subdued. Despite increase in particular producer confidence indicators it is too early to draw a conclusion about a reversal in their dynamics. Consumer demand supported by the real wage and retail lending growth remains the major driver for the economic growth. According to the Bank of Russia estimates, gross output stays slightly below its potential level. At the same time the unemployment rate stays at the relatively low level. Nevertheless, given subdued investment activity and sluggish recovery of external demand, the Bank of Russia expects economic growth rate to remain low in the medium term, while substantial widening of the negative output gap is not forecasted.

In October, annual CPI inflation increased to 6.3% which exceeded the upper bound of the target range for the current year. The acceleration of monthly inflation was attributed to non-monetary factors including rise in prices for fruits and vegetables, which was unusual for this season, and increase in prices for certain animal products. In October the core inflation annual rate remained at 5.5%. The absence of significant demand-side inflationary pressure in the context of gross output staying slightly below its potential level is one of the factors containing rise in non-food prices and core inflation in recent months. According to the Bank of Russia estimates, factors responsible for acceleration of food prices growth have short-term effect. If current macroeconomic tendencies continue, inflation is projected to decline further in 2014. Nevertheless, more pronounced downward trends in inflation expectations need to be formed to ensure the achievement of inflation goals in the medium term.

The Bank of Russia will continue to monitor inflation risks and the downside risks to economic growth. In making monetary policy decisions the Bank of Russia will be guided by the inflation goals and inflation forecast as well as economic growth prospects.

The next meeting of the Bank of Russia Board of Directors on monetary policy issues is planned to be held on 13 December 2013; the press-release on the Board of Directors’ decision is planned to be published at 13:30 Moscow time.

Interest rates on the Bank of Russia main operations¹
(% p.a.)

¹ For the information on the interest rates on all the Bank of Russia operations see table “Interest rates on the Bank of Russia operations”.
² Floating interest rate linked to the level of the Bank of Russia key rate.

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