On main directions of the uniform state monetary policy for 2017 and the period of 2018-2019

In Russia the system of instruments of monetary policy was formed by the end of 2013 and has not been undergoing significant changes in the following years. Hereafter no changes are also planned. Strategy and instruments of influence on the financial component and country’s economic development the Central Bank of Russia (CB of the RF) has stated in the fundamental document «Main directions of the uniform state monetary policy for 2017 and the period of 2018-2019».

According to the Bank of Russia, external and internal conditions will affect the formation of monetary policy in those years. The external factors, according to Megaregulator, are the growth rates of the global economy, the environment of international financial and product markets. Among the internal factors the CB of the RF notes the parameters of state policy, the structural characteristics of the economy. These factors the Bank of Russia predicts on the scenario basis and takes them into account as reference indicators by the formation of the forecast.

The scenario I (basic) is considered as the most probable. It is founded on presumptions about the preservation of changes of the environment of worldwide commodity markets within the current trends and the average price of Urals oil at the level around $ 40 per barrel. In addition, the Bank has calculated two more scenarios: in the second one the estimated figures are built, taking into account the decrease in oil price to the level of about $ 25 per barrel by the beginning of 2017 and its preservation at a low level until the end of 2019. A more optimistic scenario of forecast indicators is built, taking into account $ 55 per barrel.

In view of the developed forecast scenarios of the above mentioned factors the Bank considers that the model of economic growth based on export of primary commodities and stimulation of consumption has practically exhausted itself. Therefore, in order to move to the economic growth it is required the creation of internal sources of development, incentives for the increase of productivity and efficiency of economic activity, formation of savings and reducing of debt burden, improvement of the quality of management at all levels of state and private sectors.

Under current conditions the CB of the RF has chosen a moderately tight monetary policy, which is aimed at a gradual reduction of the annual inflation to 4% (at the year-end 2016 the annual indicator is equal to 5,4%) and keeping it close to this value in the future, at the formation of nominal interest rates at a level, ensuring positive real interest rates (key rate from 19.09.2016 is 10,0%). In the med-term such approach will remain, allowing a gradual reduction of the inflation and nominal interest rates, while maintaining their real values in the positive area.

However, Megaregulator believes that in Russia the constant maintenance of the inflation close to 4%, using the measures of monetary policy, will be difficult due to a higher level of monopolization, lack of development of market mechanisms, insufficient industry diversification of the economy, accumulated imbalances, among which are: the obsolescence of equipment fleet, the low level of high technology infusion, underdeveloped transport and logistics infrastructure, limitation of possibilities of the Central Bank to influence on prices through effective demand, high level of social inequality.

Accordingly, the Bank will carry out the monetary policy within the inflation targeting regime based on the management of domestic demand. Such approach will allow to deliver internal economic stability, first of all of prices, and the predictability of the change of interest rates, being the main channel of influence of the CB of the RF on monetary conditions in the economy and, ultimately, on inflation. In its turn, the increase or decrease in interest rates will have an impact on the dynamics of the national currency.

The flexible exchange-rate regime will be used in the future. It will allow to keep exchange reserves, secure the economic system from excessive accrual of external debt, the accumulation of imbalances, and will make it more resistant to fluctuations of external economic environment.

The CB of the RF does not rule out the possibility of the appearance of additional risks in the form of unforeseen jumps of external and internal food prices, change of the fiscal policy concerning costs, tax increase, growth of prices and tariffs regulated administratively. In such conditions by a large-scale and long-term effect of mentioned risks on the inflation processes, that lead to consolidated budget variance from the declared plans and increase of its deficit, the Bank of Russia will tighten the monetary policy.