Holding the Line on Rates

RUSSIA ENERGY / FINANCE - Report 20 Sep 2013 by Marcel Salikhov and Leonid Grigoriev
Executive SummaryStrengthened by the arrival of new deputy governor Ksenia Yudaeva, the Central Bank board of directors announced in mid September that it plans to simplify, and unify, many monetary tools. It intends, for example, to abandon its “refinancing rate” – a main policy rate that lacks any real influence over money markets.Yet, despite weak Q2 GDP data, rates weren’t cut. That’s partly due to the plunging ruble. We also think the Bank’s decision to keep rates stable is an effort to tamp down inflation expectations, and to underscore the new governor’s hawkishness. The Bank is demo...

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