Russia’s Monetary Policy in 2018

Russian Economy in 2018. Trends and Outlooks. (Issue 40). 2019. Moscow. IEP, pp. 35-54

22 Pages Posted: 16 Sep 2019

See all articles by Pavel Trunin

Pavel Trunin

Gaidar Institute for Economic Policy

Alexandra Bozhechkova

Gaidar Institute for Economic Policy; Russian Presidential Academy of National Economy and Public Administration (RANEPA) - Institute of Applied Economic Research

Anna Kiyutsevskaya

Russian Presidential Academy of National Economy and Public Administration (RANEPA)

Alexander Knobel

Gaidar Institute for Economic Policy; Russian Presidential Academy and Public Administration (RANEPA) - Institute of Applied Economic Studies

Date Written: September 5, 2019

Abstract

Russia’s central bank adopted a new monetary policy regime in 2018 by raising the key interest rate for the first time since December 2014. After slashing the key interest rate on February 9th and on March 23rd by 0.25 percentage points to 7.5 and 7.25 percent per annum, respectively, the central bank lifted the rate on September 14th by 0.25 percentage points to 7.5 percent per annum, with another hike on December 14th of 0.25 percentage points to 7.75 percent per annum. The transition to a neutral monetary policy regime slowed as far back as in 2017. There were more constraints to interest rate cuts in 2018 that came from new April and August anti-Russia sanctions that spurred capital outflows from the country and depreciation of the Russian ruble, a VAT hike decision scheduled for 2019, a late-year fall in energy prices, and concerns about possible heightening of inflation expectations. The key interest rate hike suggested that the Bank of Russia is committed to bring inflation back down to target in the medium term. For instance, according to a forecast of the central bank, end-of-year inflation for 2019 may reach 5–5.5 percent, and it is not until 2020 that inflation is back to its target.

Keywords: Russian economy, monetary policy, money market, inflation, balance of payments, exchange rate

JEL Classification: E31, E43, E51, E58, F14, F37, L60, L80

Suggested Citation

Trunin, Pavel and Bozhechkova, Alexandra and Kiyutsevskaya, Anna and Knobel, Alexander, Russia’s Monetary Policy in 2018 (September 5, 2019). Russian Economy in 2018. Trends and Outlooks. (Issue 40). 2019. Moscow. IEP, pp. 35-54. Available at SSRN: https://ssrn.com/abstract=3448484 or http://dx.doi.org/10.2139/ssrn.3448484

Pavel Trunin

Gaidar Institute for Economic Policy ( email )

Gazetny pereulok, 3-5
Moscow, 125993
Russia

Alexandra Bozhechkova (Contact Author)

Gaidar Institute for Economic Policy ( email )

Gazetny pereylok 3-5
Moscow, 125993
Russia

Russian Presidential Academy of National Economy and Public Administration (RANEPA) - Institute of Applied Economic Research ( email )

Russia

Anna Kiyutsevskaya

Russian Presidential Academy of National Economy and Public Administration (RANEPA)

Vernadskogo Prospect 82
Moscow, 119571
Russia

Alexander Knobel

Gaidar Institute for Economic Policy ( email )

3-5 Gazetny Lane
Moscow, 125009
Russia

Russian Presidential Academy and Public Administration (RANEPA) - Institute of Applied Economic Studies ( email )

Vernadsky Ave. 82
Moscow, 119571
Russia

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