Central Bank Holds Rates
- Oct. 15 2013 00:00
- Last edited 19:06
The Central Bank kept its main policy rate on hold as expected Monday, stating concerns over stubborn inflation expectations even as retail price growth fell to the top of its target range.
The bank left its key one-week minimum auction repo rate at 5.5 percent, leaving policy rates unchanged for the 13th month in a row.
The decision underscored the hawkish stance taken by new Central Bank head Elvira Nabiullina, who is determined to lower inflation expectations among households and businesses despite weak economic growth running below 2 percent.
In a statement, the financial regulator said headline consumer price inflation had fallen to 6 percent as of Oct. 7, the top of its 5 to 6 percent target range for 2013. It expected inflation to fall in 2014, when its year-end target is 5 percent.
"More pronounced trends in inflation expectations need to be formed to ensure the achievement of inflation goals in the medium term," the bank said.
The Central Bank removed a phrase seen in last month's statement, which said it saw the level of money market rates as acceptable for the near future. Economists said this might suggest an increased willingness to ease policy rates.
"In principle that opens the door for a rates move as early as next month," said Vladimir Osakovsky, economist at Bank of America Merrill Lynch in Moscow.
The bank also said that given subdued investment activity and sluggish recovery of external demand, it expected economic growth to remain low in the medium term.
Gross output remains slightly below its potential, but it did not expect this negative output gap to widen, it added.