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

The Bank of Russia Press Service informs that on 14 October 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 suggested that the pace of economic growth remained low. Production activity and investment demand remained subdued. Producer confidence indicators continued to deteriorate. At the same time the unemployment rate stayed at the relatively low level. Consumer demand supported by the real wage and retail lending growth remained the major driver for the economic growth. 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. According to the Bank of Russia estimates, gross output stays slightly below its potential level, while substantial widening of the negative output gap is not expected.

In September and in the beginning of October, annual CPI inflation decreased considerably and as of 7 October 2013 was estimated at 6.0% which corresponded to the upper bound of the target range for the current year. In September the rate of inflation declined in all consumer market segments. At the same time the dynamics of services prices made a substantial contribution to inflation decrease due to changes in terms of the regulated prices and tariffs indexation. In September the core inflation annual rate remained at 5.5%. The absence of significant demand-side inflationary pressure in the conditions of gross output staying slightly below its potential level is one of the factors of the decline in core inflation in recent months. According to the Bank of Russia estimates, given the improvement of food market conditions due to favourable assessments of this year harvest, inflation will continue to slow down, staying within the target range until the end of the year. 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 economic growth prospects.

The next meeting of the Bank of Russia Board of Directors on monetary policy issues is planned to be held on 8 November 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 theBank of Russia key rate.

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