“The decision was made based on an assessment of inflationary risks and the prospects for economic growth,” the central bank said in the statement. Moving the longer-term rates closer to the main policy tools will “strengthen the effectiveness of the interest rate channel’s transmission mechanism for monetary policy.”
Bank Rossii is targeting a range of 5% to 6% for consumer-price growth this year after overshooting the same goal in 2012 to finish at 6.6%. Inflation will gradually slow this year and is “likely” to return to the target range by year-end, Bank Rossii said in a quarterly report on monetary policy.
Still, Ignatiev called April’s reductions a “first decision” toward easing. Bank Rossii will wait to see a sustained slowdown in inflation before cutting the main borrowing costs, he said. The decreases applied to loans representing about one-fifth of the central bank’s refinancing operations, according to Credit Suisse Group AG.
“We believe that the decision to lower longer-term rates likely marks the start of a more dovish stance on the part of the monetary authorities, which may lead to further interest rate decreases this year to support growth,” Yaroslav Lissovolik, Moscow-based head of research at Deutsche Bank AG, said in an e-mailed note.
Inflation expectations among the public “fell significantly” since December, the central bank said yesterday, citing a survey of 2,000 people conducted March 25-April 1. Even so, consumer prices advanced 7.2% in April from a year earlier, faster than March’s 7% increase.
Policy makers’ assessment of the risks to growth and from inflation “looks like a copy-paste from April,” Dmitry Polevoy, chief economist for Russia at ING Groep NV, said in a note.
“The central bank sticks to its guns, resisting pressure from outside,” he said. “No change in the policy statement and the unchanged refinancing rate, which the central bank uses as a signaling tool for further policy moves, might indicate a chance for a similar outcome in June.”