ZCZC
BCN-20
RUSSIA-BANK-RATE
Russia’s Central Bank keeps key rate at 7.25%
MOSCOW, July 29, (BSS/TASS) – The Bank of Russia has decided to keep the key
rate at 7.25% per annum, noting that monetary policy is highly likely to
shift to a neutral stance in 2019.
“Though annual inflation remains below the target, it is tending to return
to 4%,” the regulator said in a statement following its board meeting on
Friday. “The balance of risks is shifted towards proinflationary risks.
Uncertainty persists over how strongly the tax measures may affect inflation
expectations and how the external conditions will develop,” the statement
said.
The decision was expected as the majority of analysts projected on
Thursday that the Central Bank would keep its key rate, waiting for the
business’ reaction on the upcoming VAT hike and amid growing inflationary
expectations.
According to the regulator, monetary policy is likely to shift to a neutral
stance in 2019. “Given the effect of the planned fiscal measures on inflation
and inflation expectations, monetary conditions should remain to some extent
tight to limit the scale of secondary effects and stabilize annual inflation
close to 4% over the forecast horizon,” the Bank of Russia said on Friday.
Meanwhile, the balance of risks is shifted towards proinflationary risks,
which the regulator said is related to uncertainty persisting over how
strongly the tax measures may affect inflation expectations and how the
external conditions will develop.
The regulator expects consumer prices to grow by 3.5-4% per year at the end
of 2018, and annual inflation to temporarily overshoot 4% in 2019. “The
annual growth rate of consumer prices is expected to return to 4% in early
2020,” it said.
According to the Central Bank, annual inflation remains low. “It stood at
2.3% in June and is expected to hold within the 2.5-2.6% range in July in
line with the Bank of Russia’s forecast,” the statement said.
The Bank of Russia forecasts that in 2018 the Russian economy will post a
1.5-2% growth rate, which corresponds to its potential amid the remaining
structural limitations.
“The FIFA World Cup made a positive contribution to the annual GDP growth
rate in Q2 (0.1-0.2 percentage points),” the statement said.
The regulator’s board of directors will hold its next key rate review
meeting on September 14, 2018.
BSS/TASS/HR/1355