Serious inflation issues and a host of other negative factors mean that Russia’s central bank cannot yet relax its stance on the rouble, the bank’s deputy governor said on Monday.
The crisis in Ukraine and its escalation following Russia’s annexation of Crimea in March forced the bank to take several emergency measures in reponse to a big rouble sell-off, including increasing the threshold for interventions to $1.5 billion from $350 million before it moves the rouble’s floating corridor.
Answering questions from parliamentary deputies about whether the central bank would restore previous parameters guiding its foreign exchange intervention policy, Ksenia Yudaeva indicated that the bank is in no rush to do so.
“We see serious problems with inflation. We see a significant slowdown in the growth of deposits. There are still many indicators that show it is too soon to relax... The interbank market is practically dead, bond issuance has declined, this complicates our monetary policy,” she said.
The bank hiked interest rates by 1.5 percentage points in March, with a further half point rise in April, decisions it was forced into in order to quell “an unfounded and irrational panic”, Yudaeva said.
In May, the rouble saw a strong rally, bringing it towards the middle range of its corridor, within which the central bank has no need to intervene to support it.
Inflation was 7.3 percent in April and is expected to rise further in May and June, hindering the central bank’s medium-term target of reducing inflation to 4 percent. (Reporting by Oksana Kobseva; Writing by Jason Bush; Editing by Louise Ireland)