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Russia to continue moderately tight monetary policy

Xinhua, March 18, 2016 Adjust font size:

Russia will keep applying a moderately tight monetary policy for a longer period of time, the country's central bank said on Friday.

"To enable the accomplishment of inflation targets, the Bank of Russia may conduct its moderately tight monetary policy for a more prolonged time than previously planned," the bank said in a statement.

The bank estimated the annual consumer price growth rate in Russia declined to 7.9 percent by March 14 from 9.8 percent in January 2016, which is lower than last year's expectation of 9-percent inflation, the statement said.

It added that the current inflation slowdown resulted from a tight monetary policy pursued by the Central Bank, the government's indexation of wages and pensions, as well as declining global food prices.

The bank predicted that quarterly inflation will continue declining in the second quarter of 2016, while annual inflation might accelerate temporarily in the middle of the year as a result of the low base effect.

"Provided there are no new shocks emerging, annual inflation is set to resume its decline as the result," the statement said.

It also forecasted annual inflation to be less than 6 percent in March 2017 and to reach the 4-percent target in late 2017.

However, the bank warned of risks that inflation may exceed the target line in late 2017 due to multiple factors including further worsening of the oil market, persistent elevated inflation expectations and so on.

The bank expected Russia's economic downturn to slow down to 1.3-1.5 percent in 2016, compared with 3.7 percent in 2015.

It also forecasted a quarterly GDP rise between late 2016 and early 2017.

"We expect the GDP rise to be close to zero in 2017, namely between minus 0.5 percent to plus 0.5 percent. But the annual growth will be positive in 2018," Central Bank Governor Elvira Nabiullina said.

According to the bank, further import substitution and non-energy export expansion will help a gradual economic recovery.

The bank added the economy will continue adjusting to low commodity prices, while employment and production capacity utilization remain steady.

The Russian economy has plunged into a recession amid the drop of global oil prices and Western sanctions imposed over Moscow's alleged intervention in the Ukraine crisis. Endi