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IMF Urges Russian Central Bank to Embark on ‘Gradual’ Tightening
The International Monetary Fund is advising a “gradual further tightening” of Russian monetary policy to keep a lid on prices as the world’s biggest energy exporter prepares to complete a shift to targeting inflation.
“The challenge in the short term is to manage domestic demand in order to avoid overheating and in the medium term to fully realize Russia’s significant growth potential by maintaining macroeconomic stability, further strengthening the policy framework, and making decisive progress on structural reforms,” the Washington-based lender said in a statement released today.
The IMF predicts Russia’s inflation will accelerate to 6.5 percent by the end of 2012, with real economic growth estimated at about 4 percent this year and next. Outflows of capital will probably continue at a “moderating pace,” the fund said.
Central bank Chairman Sergey Ignatiev has set out to hold inflation at 5 percent to 6 percent this year after delivering record-low price growth in 2011, keeping the country on the sidelines of a global round of monetary stimulus to ease credit flows and spur economic growth. Bank Rossii isn’t ruling out a first change to its policy rates this year in August as inflation risks intensify amid buoyant economic growth, central bank First Deputy Chairman Alexey Ulyukayev said last month. The regulator plans to complete a transition to inflation targeting in 2014.
Russia’s inflation probably rose in July at the fastest rate this year, with consumer prices growing 5.8 percent from a year earlier, up from 4.3 percent in June, according to the median estimate of 19 economists in a Bloomberg survey. The annual rate would be the highest since December.
Policy makers voted to hold the refinancing rate at 8 percent, a quarter-point above the record low, at their last board meeting on July 13. Money-market rates were at an acceptable level for the “nearest future,” the central bank said, dropping a reference to the “coming months” used after every rates meeting this year.
The IMF “noted the significant decline in inflation, but generally recommended a gradual further tightening of monetary policy to contain underlying pressures and anchor expectations,” according to the statement. “Directors also encouraged continued strengthening of monetary policy tools and enhanced communication policies to prepare for the successful adoption of formal inflation targeting by 2014.”
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