Broad definition monetary base increased by 12.8% y/y as of end of September, 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, and caught up with the double-digit growth seen in Apr-June averaging to 13% y/y. In m/m terms the indicator picked up to 2.5% m/m after a 2.2% m/m dive seen in July and 0.4% m/m growth in August, attributed to the tax payment period.

However, moderate growth trend of the indicator in September did not change. Both m/m and y/y advance of the monetary base is to be attributed to 45.7% y/y and 33.9% m/m surge in the correspondent accounts that gained RUB 278bn in September. Other than that, money in circulation, required reserves, and deposits with CBR remained either flat or showed modest increase.  

Despite positive m/m dynamics broad monetary base did not recover from January’s 14.5% drop. As of end of September monetary base was at RUB 9.117tn (USD 282bn), RUB 0.73tn or 7.5% ytd lower than as of end of 2012.

As reported, M2 posted growth of 17.1% y/y in August 2013 flat as compared to 17%in July, according to the data by the Central Bank of Russia (CBR). In Q2/13 average growth of the indicator was 15.3% y/y accelerating after 14% y/y average growth of M2 seen in Q1/13. This followed a stable deceleration of indicator’s growth throughout 2012 (from 22.3% y/y in January 2012 to 19% in August to 11.9% y/y in December 2012).

To compare, 16.6% y/y M2 growth was posted in August 2012, 19.4% y/y in August 2011, and 32.8% y/y in August 2010.

In September’s policy releases the CBR seemed to be coming back to a tougher monetary stance. The refinancing rate again remained unchanged even after inflation moderated to 6.5% in August and July. Head of the CBR Elvira Nabiullina argued that sees CBR’s main contribution to the economic development through curbing inflation. Monetary stimulus at this point would contribute to price growth, rather than to closing the output gap, she believes.

Nabiullina also hinted that in October the main rates are also likely to remain unchanged. The CBR is expected to lower the rates as the inflation enters 5%-6% target for this year. In September inflation already moderated to 6.1% y/y. Stronger assistance from the government with inflation-curbing measures is also likely to be required by the CBR for any bold monetary policy moves.