Bank of Russia will continue the moderately tight monetary policy

One of the forms of state regulation of the economy is the monetary policy. The Central Bank of Russia (the CB of the RF, Mega-regulator) implements it through activities that affect the change of the money supply (monetary policy) and regulate the volume of loans, level of interest rates and other indicators (credit policy).

In monetary policy the Mega-regulator uses basic instruments and methods that are defined by the federal law №86-FZ "On the Central Bank of the Russian Federation (Bank of Russia)» dated 10.0.2002 in Art. 35:

• interest rates on operations of the Bank of Russia;
• mandatory reserve requirements;
• open-market transactions;
• refinancing of credit institutions;
• exchange rate interventions;
• setting of monetary targets;
• direct quantitative restrictions;
• bond issue on behalf of itself;
• other instruments defined by the Bank of Russia.

As of the end of March 2016 there were a number of changes taken place in the system of instruments of the monetary policy of the Bank of Russia. Thus, the value of the refinance rate has been equated to the value of the key rate of the CB of the RF, at present it is 11%. 

By commitments of credit institutions in foreign currency, with the exception of obligations to individuals, the legal reserve requirements has been increased by 1 percentage point since April 1, 2016 and now they reach 5,25%. 

All shares of legal entities - residents of the Russian Federation and Russian depositary receipts for shares of legal entities - non-residents of the Russian Federation are excluded from the Lombard List of the Bank of Russia after February 1, 2016 included in it on the date of adoption of this decision.

Since January 19, 2016 the instrument of refinancing of credit institutions has been created, that allows to secure the right of claim on loans granted to leasing companies within the provisions defined by the Fund for the Development of Industry.

The Bank of Russia hasn’t been carrying out foreign exchange interventions (purchase / sale) in the domestic currency market since July 29, 2015. At the same time the Federal Treasury hasn’t been making the purchase / sale of foreign currency since February 3, 2015. 

The lending of the CB of the RF on ongoing transactions aimed at ruble liquidity provision has been increased since March 1, 2016, for example, on «overnight» credits - up to 0,4 bln RUB per day, collateral loans – up to 10,7 bln RUB, transactions «currency swap» - up to 37,0 bln RUB, repo transactions - up to 299,7 bln RUB. At the same time on open-market transactions it is noted a decrease on the provision of liquidity volumes, for example, for repo auctions - almost three times.

The analysis of the situation in the Russian economy has shown that, for example, to reduce the inflation in the economy up to 4% in 2017 the Mega-regulator will carry out the moderately tight monetary policy. However, according to the Central Bank, it will take a more prolonged period, than had been expected earlier, because inflation risks remain high due to the unpredictable oil market environment, persistent inflation expectations, uncertainty of separate parameters of the budget. In support of its intentions the CB of the RF has kept the key rate intact, which it has set as early as in August 3, 2015.