IMF: Inflation in Russia to reach the target in 2017

On 18 May 2017, representatives of the International Monetary Fund (IMF) Mission met Elvira Nabiullina, Bank of Russia Governor, to discuss the outcomes of the latest round of consultations under Article IV of the IMF’s Articles of Agreement, held at the Bank of Russia. During the discussion, the IMF’s specialists noted that inflation would hit the regulator’s 4% target this year and future monetary policy should be aimed at keeping inflation close to this target.

Ernesto Ramirez Rigo, IMF Mission Chief for Russia and Assistant Director of the IMF European Department, believes that the monetary policy easing launched in early March was reasonable, given the inflation forecasts and lowering inflation expectations.

The IMF’s specialists believe that the key rate should be further cut in stages with due account taken for the uncertainty over the output gap, oil price volatility and possible U-turn in the disinflation trend due to the exchange rate movement. The IMF forecasts that Russian economic growth rate will stand at 1.4% of GDP due to easing financial conditions and climbing oil prices.

The Mission was positive in its assessment of the Bank of Russia’s efforts in financial resolution of credit institutions. The IMF notes that the Bank of Russia has managed to enhance the stability of the banking system through introducing international regulatory standards and macroprudential measures. The IMF’s specialists also praised the initiatives taken to transition to proportional regulation of the banking system and the introduction of a new approach to resolution. However, the Mission noted that the introduction of formal procedures and early response measures in problem banks should be accelerated and a bail-in mechanism should be developed to enhance supervision.

The IMF’s specialists supported the efforts of the Russian authorities in countering tax evasion and corruption-related financial crimes.

The IMF Mission’s findings are published in the respective Concluding Statement.