Russia's CB keeps 11% key interest rate unchanged

By bne IntelliNews January 29, 2016

The Central Bank of Russia (CBR) will keep the key interest rate unchanged at 11%, it said after the board of directors met on January 29. This is the forth consecutive time the CBR has held back monetary easing as plunging oil prices and renewed ruble volatility threaten to undermine inflation targets.

The move was broadly expected: All 42 respondents in a Bloomberg survey expected the key interest rate to be kept at 11%.

As some analysts predicted, the CBR was more hawkish and said in an accompanying statement that "should inflation risks amplify, the Bank of Russia can't rule out a tightening of its monetary policy".

"The deterioration of the global commodity market will require a further adjustment of Russian economy," the CBR said, seeing "a higher risk of accelerated inflation".

The continuation of the monetary easing cycle has been postponed by the regulator since August 2015, after it cut the key interest rate by 6pp from 17% throughout 2015.

Although inflation had been expected to moderate to 10% y/y in January (from 12.9% y/y in 2015 overall), "another round of exchange rate pass-through is set to impact both prices and inflation expectations, which remain anchored to FX moves", VTB Capital said on January 29.

The bank estimates the lag between currency devaluation and the CPI effects at about four weeks and expects January's stable weekly inflation reports to be followed by "a more visible uptick in the inflation run rate" despite weak demand.

Alfa Bank added that while the current stabilisation in monthly price growth "seems positive at a first glance" it does not believe it changes the case for the CBR's rate decision.

Given the downside risks on the commodity market, continuing ruble depreciation now "looks to be a question of time, and thus the pass-through effect on inflation remains a risk for this year's inflation trend", Alfa noted on January 28.

In the current situation, any better than expected inflation figures would reduce the risk of a rate hike rather than offering an opportunity for a cut, the bank's analysts said.

Related Articles

Turkish central bank releases $500mn of liquidity via new deposit swaps market

The Turkish central bank on January 18 provided around $500mn of liquidity with a maturity of one-week to Turkish lenders at the first auction held under the scope of the newly launched FX ... more

Azerbaijan's IBA doubles authorised capital to €640mn after share issuance

The International Bank of Azerbaijan, the country's largest lender, has doubled its authorised capital to AZN1.24bn (€640mn) through the issuance of shares on the domestic stock exchange, ... more

Poland preparing to push lenders into conversion of forex loans

Poland is preparing a set of “supervisory and regulatory mechanisms” to push banks into restructuring their forex loan portfolios, the National Bank of Poland (NBP) said on January 2. A ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss