Monetary Policy of the Bank of Russia

Transcription

1 Monetary Policy of the Bank of Russia Ksenia Yudaeva, Ph.D., First Deputy Governor Geneva, February 25

2 2 Inflation Targeting in Russia: Motivation & Challenges Motivation: Unanchored inflation Expectations Heavy Dependence on Resource Prices High level of Dollarization Challenges: Fear of Floating FX Liquidity Deficit Oil Price Decline and Sanctions Underdeveloped Derivative Markets - limited potential to hedge interest rate risk and foreign exchange exposure

3 3 Bank of Russia Monetary Policy Framework Guidelines for the Single State Monetary Policy in 2015 and for 2016 and 2017 (Flexible) Inflation Targeting starts in 2015 The monetary policy goal is to lower inflation to 4% in 2017 and keep it close to this level. The inflation target is set for the consumer price index (CPI), which is measured for a month on the corresponding month of the previous year As long as it does not hamper achieving the inflation target, the Bank of Russia s monetary policy seeks to smooth out cyclical fluctuations of economic activity and financial indicators relative to their fundamental levels. By the end of 2014, the Bank of Russia will complete the transition to a floating exchange rate regime. Under the new regime, the regulator will abandon its domestic foreign exchange market operations designed to influence the exchange rate, except for the cases when it is necessary to maintain financial stability. Financial Stability In addition to price stability, the Bank of Russia also promotes sustainable functioning and development of the banking sector, financial market and payment system.

4 4 Inflation in Russia Target Headline CPI Core CPI (Rosstat) Source: Rosstat, CBR

5 5 Transition to Key Interest Rate as Policy Instrument 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% The CBR refinancing rate The CBR stand-by REPO rate The CBR stand-by deposit rate The CBR minimum REPO rate The CBR maximum deposit auction rate Interbank market O/N rate (MIACR) The unified rate on o/n stand-by refinancing operations The CBR key rate The CBR stand-by deposit rate

6 6 Intermediate Regime Interest Rate Targeting Floating Exchange Rate Band

7 7 Bank of Russia Instruments Purpose Type of instrument Instrument Term Rate, % p.a. Liquidity provision Liquidity absorption FX liquidity provision Standing facilities (fixed rates) Open market operations (minimum interest rates) Overnight loans; REPO; FX swaps (ruble rate); Lombard loans; loans secured by gold; loans secured by nonmarketable assets and guarantees Loans secured by gold Loans secured by non-marketable assets and guarantees Loans secured by non-marketable assets, auctions 1 day days days weeks, 3 months, 18 months** 15.25* 1 week, 1-6 REPO auctions days Open market operations (key rate) (maximum interest rates) Deposit auctions 1 week, 1-6 days Standing facilities (fixed rates) Deposit operations 1 day, call FX USD/RUB sell/buy swap FX REPO FX Credit * Floating interest rate, linked to the BoR key rate. ** Held on an irregular basis. 1 day 1 week, 28 days, 12 months 28 days, 365 days USD: 1.5 RUB: 7.0 LIBOR LIBOR

8 8 Exchange Rate Moving Band as an Intermediate Regime Source: CBR

9 9 The Moving band: an Evolution -$350 Upper boundary -$350* -$350 -$350 -$1500 -$1500 -$ RUB $ RUB -$400** 0.95 RUB -$ RUB -$ RUB -$ RUB -$ RUB -$ RUB $0 "technical range" 1 RUB -$200 1 RUB -$200 1 RUB -$200 1 RUB -$200 1 RUB -$100 1 RUB $0 1 RUB $0 1 RUB -$70 1 RUB -$ RUB $0 0.1 RUB $0 0.1 RUB $0 0.1 RUB $0 1 RUB $0 0.1 RUB $0 1 RUB $0 3 RUB $0 3 RUB $0 3 RUB $0 3 RUB $0 5 RUB $0 "neutral range" 1 RUB $70 1 RUB $70 1 RUB $200 1 RUB $200 1 RUB $200 1 RUB $200 1 RUB $100 1 RUB $ RUB $ RUB $ RUB $ RUB $ RUB $ RUB $200 1 RUB $0 $350 $350 $350 $1500 $ RUB $350 $0 Lower boundary Up to 1 Oct Oct Oct March May June Aug 2014 Notes: * - Cumulative volumes in USD mln leading to 0.05 RUB-shift of the band ** - Volumes of interventions within the ranges in USD mln $350 million per day*** Bank of Russia's exchange rate policy mechanism abolished **** 5-7 Nov Nov 2014 *** - From 5 to 7 November 2014 the Bank of Russia carried out foreign currency sell/buy operations with the intensity equal to $350 million per day **** - cancelling the permissible range of the dual-currency basket ruble values (operational band) and regular interventions on and outside the borders of this band

10 10 Challenges of 2014: Oil Prices Monthly Imported Crude Oil Price dollars per barrel 140 Forecast 120 Nominal Price Real Price (Feb 2015 $) янв 1974 янв 1978 янв 1982 янв 1986 янв 1990 янв 1994 янв 1998 янв 2002 янв 2006 янв 2010 янв 2014 EIA Short-Term Energy Outlook, February 2015

11 11 Challenges of 2014: Oil Prices and Exchange Rates Real Oil Price, EIA Ruble REER, 2010=100, BIS, r.s Source: BIS, EIA

12 12 Challenges of 2014: FX liquidity deficit

13 13 New Instruments aimed to address FX market disruption Additional tools aimed at smoothing spikes in volatility of the ruble exchange rate due to shortterm increase in demand for foreign currency September 2014 October 2014 November 2014 December 2014 one-day USD/RUB FX swaps at fixed interest rates 1-week and 28-day FX REPO auctions (USD, EUR): at (LIBOR ) and (LIBOR ), respectively maximum total amount outstanding is limited at 50 bn. USD until the end of months FX REPO auctions (USD, EUR) 1-week, 28-day, 12-months interest rates at LIBOR week, 28-day, 12-months interest rates set at LIBOR day and 365-day FX credits with fx credits to exporters as collateral - the Interest rate at LIBOR+0.75

14 14 Policy implemented to balance between different policy goals Bank of Russia measures to maintain stability of Russian financial sector in December FX loans secured by non-marketable assets to credit institution; lower interest rates on FX REPOs - Support to the central counterparty at the Moscow Exchange for market participants to be convinced of the reliability of the centralized clearing and its uninterrupted functioning - Measures to enhance interest rate risk management: restrictions on the values of effective interest rates of consumer loans; expansion of the range of standard market deviation of interest rates on household deposits. - Measures to enhance credit risk management: ratings of the borrower s financial standing, provisions on loans, etc. - The Bank of Russia and the Government of the Russian Federation develop measures for additional capitalisation of credit institutions in 2015

15 15 Current Situation: Exchange Rate Stabilized CBR Interventions unrelated to MinFin operations, USD bn., r.s. CBR Interventions related to MinFin operations, USD bn., r.s. RUR/USD Sourse: Bloomberg, CBR Source: Bloomberg

16 16 Current Situation: Inflation is major challenge FOM Survey: median perceived inflation FOM Survey: median perceived 1 year ahead inflation actual CPI inflation, r.s weeks sub*-cpi inflation, percent change of consumer prices for 4 weeks Dec'08 Sep'08 Feb' Source: Rosstat, FOM * - Weeklyinflation represents around 30% of the CPI Source: Rosstat, Bank of Russia calculations

17 17 Current Situation: Inflation is major challenge Jan-15 May-14 Sep-13 Jan-13 May-12 Sep-11 Jan-11 May-10 Sep-09 Jan-09 May-08 Sep-07 Jan-07 May-06 Sep-05 Jan-05 May-04 Sep-03 Jan-03 Set of underlying inflation measures Headline CPI Core CPI (Rosstat) * - see Deryugina, et al. Evaluating Core Inflation Measures for Russia, 2015, Bank of Russia Working Paper, to be published

18 18 Current Situation: Market is still learning the new rules of the game 20 Interest Rates (% p.a.) Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Source: Bank of Russia Short-Term Households' Deposit Rate Short-Term Corporate Loan Rate Overnight Interbank Rate (MIACR) Long-Term Households' Deposit Rate Long-Term Corporate Loan Rate

19 19 Current Situation: Industrial Production is Resilient Industrial Production (NSA, %YoY), r.s. HSBC PMI: COMPOSITE - OUTPUT SADJ Sourse: HSBC, Rosstat

20 20 Current Situation: Consumer and Investment Demand Decline Retail Trade, %YoY -20 Investments in Fixed Capital, %YoY -15 Real Disposable Income, %YoY -30 Construction, %YoY 1-Jan-07 1-Jul-07 1-Jan-08 1-Jul-08 1-Jan-09 1-Jul-09 1-Jan-10 1-Jul-10 1-Jan-11 1-Jul-11 1-Jan-12 1-Jul-12 1-Jan-13 1-Jul-13 1-Jan-14 1-Jul-14 1-Jan-15 1-Jan-07 1-Jul-07 1-Jan-08 1-Jul-08 1-Jan-09 1-Jul-09 1-Jan-10 1-Jul-10 1-Jan-11 1-Jul-11 1-Jan-12 1-Jul-12 1-Jan-13 1-Jul-13 1-Jan-14 1-Jul-14 1-Jan-15 Sourse: Rosstat Sourse: Rosstat

21 21 Current Situation: Labor Market - Estimated 95% confidence interval for NAIRU is [5,6%;; 7,7%]. Actual NSA Unemployment Rate in January 2015 is 5.5% - LFP rate was 67.1% in 2007 vs. 69.4% in Labor Force, mln. Employed, mln. Unemployment Rate, %, r.s. Source: Rosstat, Tramo-Seats SA by Bank of Russia

22 22 Current Situation: Capital Outflow and Reserves Capital inflow/outfow (bln. USD) est. Banks - assets Banks - liabilities Other sectors - assets Other sectors - liabilities Other sectors - net errors and omissions Net private capital inflow/outflow Note: figures are adjusted to account for FX swaps and other FX liquidity-providing operations of the Bank of Russia and balances in credit institutions'accounts with the Bank of Russia Source: CBR

23 23 The Central Bank of The Russian Federation