Broad definition monetary base increased by 11.3% y/y as of end of October 2013, report by the Central Bank of Russia (CBR) shows. The y/y growth rate of the indicator picked up from 7.9% y/y seen in July and 9.7% y/y in August, but declined as compared to September’s 12.8% y/y advance. In m/m terms the indicator declined by 1.8% m/m after a 2.5% m/m increase seen in August. Slight increase seen in August and September could be attributed to the tax payment period.

M/m decline of the monetary base is to be attributed to 12.5% m/m contraction in the correspondent accounts that gained RUB 138bn in October. Deposits of CBR also dropped by 39% m/m or RUB 56bn. Other than that, money in circulation, required reserves, and deposits with CBR remained either flat or showed modest increase. 

Throughout 2013 broad monetary base did not recover from January’s 14.5% drop. As of end of October monetary base was at RUB 8.952tn (USD 276bn), RUB 0.9tn or 9.1% ytd lower than as of end of 2012.

As reported, last week of the Central Bank of Russia (CBR) resolved to keep the main interest rate of 5.5% unchanged in November. This was expected as October’s inflation went out of CBR’s target range of 5%-6% amounting to 6.3% y/y. The central bank commented that inflation acceleration in October was based on short-term effects, such as rise in food prices. However, there is risk of not complying with inflation target for 2013.

The decision was expected by the analysts surveyed by Reuters. RUB and OFZ federal bonds market also did not react to the announcement. Some moderation on CBR’s behalf is still anticipated due to high risks to the economic growth in mid-term perspective. But any moves are conditioned by inflationary expectations and actual price gr

Before October, inflation in the past two months converges to the CBR’s target of 5%-6%, the central bank took a tougher stance on inflation targeting and possibly providing monetary stimulus. Head of the CBR Elvira Nabiullina argued that CBR’s main contribution to the economic development is through curbing inflation. Monetary stimuli at this point would contribute to price growth, rather than to closing the output gap, she believes.