Monetary Policy Aims | Bank of Russia

Monetary Policy Aims

The principal medium-term objective of the Central Bank of the Russian Federation is to reduce inflation while maintaining or possibly accelerating GDP growth and at the same time create preconditions for a fall in unemployment and a rise in real household income. The guidelines for the single state monetary policy for 2000 envisage a drop in the inflation rate to 18-22% over the year amid the continued growth in the production of goods and services, which may amount to 1.5-2%. These economic growth projections and inflation slowdown targets are quite feasible because the factors that brought about an end to the economic recession in 1999 are still there. The main precondition for economic growth in 2000 is the expansion of demand in all sectors of the economy and the availability of underutilised production capacities and a surplus labour force.

An intermediate target of the monetary policy in 2000 is to ensure a 21-25% growth in the M2 money supply over the year. If money velocity slows down as expected, that will signify that the real-term expansion of money supply will continue.

	2000 (official projection)
GDP (billion rubles)	5,350
as % of the previous year	101.5
Industrial production, as % of the previous year	104
Consumer price index, December 2000 as % of December 1999	118
Industrial Producer Price Index, December 2000 as % of December 1999	121
M2 growth index over the year, %	121-125

Control over money supply remains a major means of ensuring external and internal stability of the ruble and a basis for gradual and predictable variations of the exchange rate. In 2000 the Bank of Russia will continue to implement the floating exchange rate policy, which accords better with the objectives and tasks of the Russian economy. The principal tactic of the Bank of Russia in the domestic foreign exchange market will be to smooth down sharp exchange rate fluctuations while implementing foreign exchange regulation and foreign exchange control with the aim of making the market rate better correspond to the actual economic conditions. A floating exchange rate regime creates more favourable conditions for the preservation and accumulation of international reserves by the Bank of Russia, which is especially important from the viewpoint of evaluation of Russia’s solvency and the tackling of the foreign debt problem.

The level of international reserves and indicators characterising the state of foreign trade (such as export and import dynamics, world prices of major Russian exports and overall change in trading conditions) in 2000 become the most significant criteria of the monetary policy’s relevance to the proclaimed objectives and tasks.

The operational objective of the monetary policy in 2000 is base money dynamics. The operational procedure is based on control over the amount of net international reserves and net domestic assets of the monetary authorities and implies the use of all the instruments the Bank of Russia has at its disposal.

In 2000 the Bank of Russia’s efforts aim at establishing a more flexible system of monetary instruments, relevant to the changes in the macroeconomic environment, financial market structure and banking, payments and settlement systems and meeting the need for expansion of bank lending to the real economy and households. The Bank of Russia will continue to upgrade the mechanism of reserve requirements and its legal framework, improve its permanent loan and deposit mechanisms and expand its open market operations. To encourage bank lending to the real economy, the Central Bank is currently working on a procedure for refinancing banks against promissory notes, rights of claim under credit agreements and mortgages.

The Bank of Russia and the Government are determined to work together in order to bring about a radical improvement in the conditions in which the monetary policy is implemented. This applies, above all, to the creation of favourable preconditions for active operation of the interbank loan market, restoration of confidence in government securities and consolidation on this basis of a major segment of the financial market, such as the government debt market.

Latest update on March 20, 2000.

January 1, 1991	the refinancing rate was set at 20%.
June 1, 1991	commercial banks were required to transfer 2% of the funds they attracted to the compulsory reserves fund.
July 24, 1991	Gosbank of the USSR took a decision on introducing a "tourist" ruble of 32 rubles to dollar which actually became the official exchange rate.
December 2, 1991	The "tourist" ruble rate was abolished; commercial banks were given the right to set a foreign currency buy/sale rate in operations with individuals.
February 1, 1992	the reserve requirement rates for demand accounts and time accounts with terms shorter than 1 year were set at 10%, and the rates for liabilities falling due after 1 year were set at 5%.
March 1, 1992	the reserve requirement rates for demand accounts and time accounts with terms shorter than 1 year were set at 15%, and the rates for liabilities falling due after 1 year were set at 10%.
March 30, 1992	the refinancing rate was raised to 50%.
April 1, 1992	the reserve requirement rates were set at 20% for demand accounts and accounts with terms under 1 year and 15% for liabilities falling due after 1 year. These rates were effective until February 1, 1995.
May 23, 1992	the refinancing rate was raised to 80%.
June 8, 1992	the Bank of Russia started setting the official ruble/foreign currencies exchange rate on a weekly basis. Besides the official rate, there was a market rate which was fixed by the results of trading sessions on MICEX.
March 30, 1993	the refinancing rate was raised to 100%.
June 2, 1993	the refinancing rate was raised to 110%.
June 22, 1993	the refinancing rate was raised to 120%.
June 29, 1993	the refinancing rate was raised to 140%.
July 15, 1993	the refinancing rate was raised to 170%.
September 22, 1993	the refinancing rate was raised to 180%.
October 15, 1993	the refinancing rate was raised to 210%.
April 29, 1994	the refinancing rate was reduced to 205%.
May 17, 1994	the refinancing rate was reduced to 200%.
June 2, 1994	the refinancing rate was reduced to 185%.
June 22, 1994	the refinancing rate was reduced to 170%.
June 30, 1994	the refinancing rate was reduced to 155%.
August 1, 1994	the refinancing rate was reduced to 150%.
August 24, 1994	the refinancing rate was reduced to 130%.
October 12, 1994	the refinancing rate was raised to 170%.
November 17, 1994	the refinancing rate was raised to 180%.
January 6, 1995	the refinancing rate was raised to 200%.
February 1, 1995	reserve requirement rates were differentiated: 22% for demand accounts and commercial bank liabilities falling due after 30 days or less; 15% for liabilities falling due after more than 30 days up to 90 days, inclusive; 10% for liabilities falling due after more than 90 days; 2% for current accounts in foreign currency.
May 1, 1995	reserve requirement rates on demand accounts and commercial bank liabilities falling due after 30 days or less were reduced to 20%; the rates on liabilities falling due after more than 30 days up to 90 days, inclusive, were reduced to 14%; for time liabilities falling due after 90 days the rates did not change (10%); the rates on current accounts in foreign currency were cut down to 1.5%.
May 16, 1995	the Bank of Russia refinancing rate was reduced to 195%.
June 19, 1995	the Bank of Russia refinancing rate was reduced to 180%.
July 6, 1995	the ruble exchange rate fluctuations were limited and set at 4.300 rubles to 4.900 rubles for one US dollar for the period from July 6 to October 1, 1995.
October 1, 1995	the ruble exchange rate fluctuations were limited to 4.300-4.900 rubles per US dollar for the period from October 1 to December 31, 1995.
October 24, 1995	the Bank of Russia refinancing rate was reduced to 170%.
November 30, 1995	the ruble exchange rate fluctuations were limited to 4.550-5.150 rubles per US dollar for the period from January 1 to June 30, 1996.
December 1, 1995	the Bank of Russia refinancing rate was reduced to 160%.
February 10, 1996	the refinancing rate was reduced to 120%.
May 1, 1996	the reserve requirement rates on demand accounts and commercial bank liabilities falling due after 30 days or less were reduced to 18%; the reserve rates on liabilities falling due after more than 30 days up to 90 days, inclusive, were not changed (14%), the rates on liabilities falling due after 90 days remained unchanged (10%) and the rates on current accounts in foreign currency were reduced to 1.25%.
May 16, 1996	the ruble exchange rate fluctuations were limited for the period from July 1 to December 31, 1996, to 5.000-5.600 rubles for 1 US dollar as of July 1, 1996, and 5.500-6.100 rubles as of December 31, 1996.
June 11, 1996	the reserve requirement rates were hiked to 20% on demand and time accounts of commercial banks falling due after 30 days or less, to 16% on liabilities falling due after more than 30 days up to 90 days, inclusive, to 12% on liabilities falling due after 90 days, and to 2.5% on foreign-currency current accounts.
July 24, 1996	the Bank of Russia refinancing rate was reduced to 110%.
August 1, 1996	the reserve requirement rates were reduced to 18% on demand accounts and commercial banks’ liabilities falling due after 30 days or less, to 14% on liabilities falling due after more than 30 days up to 90 days, inclusive, and to 10% on liabilities falling due after 90 days, and the reserve requirement rates on current accounts in foreign currency were raised to 5%.
August 19, 1996	the Bank of Russia refinancing rate was reduced to 80%.
October 21, 1996	the Bank of Russia refinancing rate was reduced to 60%.
November 1, 1996	the reserve requirement rates on demand accounts and commercial bank liabilities falling due after 30 days or less were reduced to 16%, the rates on liabilities falling due after more than 30 days up to 90 days, inclusive, were cut down to 13%, the rates on liabilities falling due after 90 days did not change (10%) and the rates on foreign currency current accounts remained unchanged (5%).
November 26, 1996	the ruble exchange rate band was set from 5.500 rubles to 6.100 rubles per US dollar as of January 1, 1997, and from 5.750 rubles to 6.350 rubles as of December 31, 1997.
December 2, 1996	the Bank of Russia refinancing rate was reduced to 48%.
February 10, 1997	the Bank of Russia refinancing rate was reduced to 42%.
April 28, 1997	the Bank of Russia refinancing rate was reduced to 36%.
May 1, 1997	the compulsory reserve requirements on demand accounts and fixed-term liabilities of commercial banks under 30 days were cut down to 14%, on fixed-term liabilities with terms from 30 to 90 days to 11%, on fixed-term liabilities in excess of 90 days to 8%, and on current accounts in foreign currency the compulsory reserve requirements were raised to 6%.
June 16, 1997	the Bank of Russia refinancing rate was reduced to 24%.
October 6, 1997	the Bank of Russia refinancing rate was reduced to 21%.
November 11, 1997	the Bank of Russia refinancing rate raised to 28%.
November 11, 1997	reserve requirement for foreign-exchange borrowings made by banks is raised to 9%.
November 11, 1997	after January 1, 1998, the Bank of Russia central exchange rate for a three-year period (1998-2000) will be 6.2 rubles to the dollar (after denomination) and its possible fluctuations will not be allowed to exceed 15%.
February 1, 1998	a single reserve requirements ratio of 11% was set on banks' attracted funds in rubles and foreign currency.
February 2, 1998	the Bank of Russia refinancing rate was raised to 42%.
February 17, 1998	the Bank of Russia refinancing rate was reduced to 39%.
March 2, 1998	the Bank of Russia refinancing rate was reduced to 36%.
March 16, 1998	the Bank of Russia refinancing rate was reduced to 30%.
May 19, 1998	the Bank of Russia refinancing rate was raised to 50%.
May 27, 1998	the Bank of Russia refinancing rate was raised to 150%.
May 27, 1998	Lombard credit auctions are resumed from June 1 to August 1, 1998.
June 5, 1998	the Bank of Russia refinancing rate was reduced to 60%.
June 29, 1998	the Bank of Russia refinancing rate was raised to 80%.
July 24, 1998	the Bank of Russia refinancing rate was reduced to 60%.
August 17, 1998	the Bank of Russia switched to the floating exchange rate of the ruble within new limits of the currency band: 6-9.5 RUR/$.
August 24, 1998	a single ratio of 10% for required reserves on attracted funds in rubles and foreign currency was introduced; for Russia's Sberbank the ratio of required reserves on attracted funds was lowered to 7%.
September 1, 1998	Ratios to the tune of 5% were set for required reserves on attracted funds in rubles and foreign currency for Sberbank and credit institutions whose share of investment in government securities (GKO -OFZ) in operating assets was 40% and above. The ratio of 7.5% was set for required reserves on attracted funds in rubles and foreign currency for credit institutions whose share of investment in government securities (GKO -OFZ) in operating assets was in the range of 20-40%.
September 2, 1998	the Bank of Russia cancelled the upper limit of changes in the official ruble exchange rate of 9.5 RUR/$.
October 6, 1998	two trading sessions were introduced on MICEX: a special morning trading session where the compulsory sale of 50% of export earnings is effected along with foreign currency purchases by authorised banks which submit clients' applications; and an evening session where banks buy and sell foreign currency on their behalf and for their own account.
December 1, 1998	a single ratio of 5% for required reserves on attracted funds in rubles and foreign currency was set.
March 19, 1999	a required reserve ratio on attracted legal entities' is set at the level of 7%.
June 10, 1999	the Bank of Russia refinancing rate was reduced to 55%.
June 10, 1999	the required reserves ratio on individuals' deposits in rubles was increased up to 5.5%; on attracted funds of legal entities in rubles and foreign currency and on deposits of individuals in foreign currency - up to 8.5%.
January 1, 2000	the required reserves ratio on individuals' deposits in rubles was increased up to 7%; on attracted funds of legal entities in rubles and foreign currency and on deposits of individuals in foreign currency - up to 10%.
January 24, 2000	the Bank of Russia refinancing rate was reduced to 45%.
March 7, 2000	the Bank of Russia refinancing rate was reduced to 38%.
March 21, 2000	the Bank of Russia refinancing rate was reduced to 33%.
July 10, 2000	the Bank of Russia refinancing rate was reduced to 28%.
November 4, 2000	the Bank of Russia refinancing rate was reduced to 25%.

Latest update on November 4, 2000.