The text of the statement by the Central Bank following the meeting on interest rates

The text of the statement by the Central Bank following the meeting on interest rates


The development of the economic situation in Russia will depend on the speed adjustment of the economy to external shocks occurred. On Friday, it was decided to keep the key rate at 11% per annum.

MOSCOW, 11 Dec. The Bank of Russia following the meeting of the Board of Directors on Friday decided to keep the key rate at 11% per annum.

Full text of the statement of Bank of Russia

The Board of Directors of the Bank of Russia 11 December 2015, has decided to keep its key rate unchanged at 11.00% per annum, given the increase in inflationary risks while maintaining the risks of a cooling economy. The annual rate of increase in consumer prices at the end of 2016 will be about 6% and will reach the target level of 4% in 2017. With the slowdown of inflation in line with forecast and subject to the weakening of inflationary risks the Bank of Russia will resume the reduction of the key rate on one of the next meetings of the Board of Directors.

In November — early December 2015, the decline in inflation continued. According to the Bank of Russia, as of 7 December the annual rate of increase in consumer prices amounted to 14.8% after 15.6% in October. With the exception of seasonality month inflation fell from 0.9% in August-October down to 0.7% in November. Slower growth in consumer prices was promoted by a favorable conjuncture of the agrarian market, the gradual exhaustion of the impact on prices occurred in July-August ruble depreciation and weak consumer demand, low growth of nominal incomes of the population. The decrease in annual inflation, also due to the sharp rise in consumer prices a year ago (base effect). However, the slowdown in consumer prices was somewhat slower than expected. In addition, inflation expectations of the population in November increased, although it was expected a decrease.

A restraining influence on prices also have a moderately tight monetary conditions. The growth rate of money supply (M2) increased, but remain low. The decline in Deposit and credit rates taking place under the influence previously adopted by the Bank of Russia of decisions on reduction of the key rate has slowed. Deposit and loan rates remain at a level that, on the one hand, contributes to maintaining the attractiveness of savings in roubles on the other, along with maintaining a high debt load and increased requirements to the quality of borrowers and collateral, is a low factor in the annual growth rate of lending.

According to preliminary estimates of Rosstat, in the III quarter of the annual rate of decline of GDP has declined. However, the mixed dynamics of main macroeconomic indicators in October indicates the instability of this tendency. The decline in industrial output and investment was at a slower pace than previously, however, the reduction of consumer demand has accelerated. In conditions of negative demographic trends, unemployment remained at a low level, and the adjustment of the labour market to new conditions was mainly due to the decrease in real wages and the growth of part-time employment.

In the coming months is expected to continue current trends. The slow pace of real income growth and retail lending will continue to curb consumer spending. Investment activity will remain weak amid continued economic uncertainty and relatively tight credit conditions. To restrain investment demand will also be limited possibilities for replacement of external sources of internal financing due to the narrowness of the Russian financial market and high debt load companies. Nevertheless, some support for investments will provide the implementation of public policies. In the conditions of adverse conjuncture of the world commodity markets is expected to decrease exports. However, weak domestic demand will result in a more significant reduction in value of imports. As a result, the contribution of net exports to annual growth rates of output of goods and services will remain positive.

Further development of the economic situation will depend on the speed adjustment of the economy to external shocks occurred. According to the forecast of Bank of Russia, the gradual easing of domestic financial conditions, deleveraging and the improvement in business sentiment in the second half of 2016 will create the preconditions for the recovery of investment and production activity in 2017. This, in turn, will lead to higher incomes that will boost the consumer demand in 2018. The decline in GDP will slow to 0.5-1.0% in 2016. In 2017, economic growth will amount to 0.0 to 1.0%.

In early 2016, annual inflation will decrease significantly, which will be due to the high value of this indicator in the beginning of 2015. Introduction from January 2016 trade restrictions against Turkey will not have a significant impact on the dynamics of consumer prices. Until the end of 2015 — early 2016 is a possible increase in inflation from these restrictions is estimated at between 0.2 and 0.4 percentage points. The decrease in annual inflation in 2016-2017 will contribute to weak consumer demand and a moderately tight monetary conditions. Slower growth of consumer prices will create conditions to lower inflation expectations. According to the forecast of Bank of Russia, the annual rate of increase in consumer prices will amount to about 6% at the end of 2016 and to reach the target level of 4% in 2017, boosted by monetary and credit policy.

The main source of inflationary risk remains a possible further worsening of foreign economic conditions on long-term preservation of oil prices at a low level, the normalization of monetary policy of key Central banks and the continuation of the slowdown of the Chinese economy. In addition, inflation can inhibit the preservation of inflation expectations at an elevated level for a long time, the revision scheduled for 2016-2017 rate of growth of regulated prices and tariffs, indexation of benefits, and overall easing of fiscal policy.

With the slowdown of inflation in line with forecast and subject to the weakening of inflationary risks the Bank of Russia will resume the reduction of the key rate on one of the next meetings of the Board of Directors.

The next meeting of the Board of Directors of the Bank Russia, which will address the issue of the level of the key rate, scheduled for January 29, 2016. The time of publication of the press release about the decision of the Board of Directors of the Bank of Russia — 13:30 Moscow time.