According to the CBR, the monetary base had grown 6.3% YoY as of 1 June (vs. 6.1% YoY on 1 May) and cash in circulation had increased 17.1% (vs. 17.1%), while the monetary base, excluding deposits in the CBR and OBR holdings, was up 14.5% (vs. 16.4%).
The growth in the monetary base reversed from -1.3% YoY in September 2011 then accelerated to 6.3% in May 2012, driven by the strong base effect of much higher excess reserves during 2010-11 (the total sum of deposits and OBRs last year was RUB 718bn, whereas now it stands at just RUB 112bn). Excluding excess reserves, the monetary base growth rate continues to moderate, reflecting the lower correspondent account balances at the start of the month (itself the result of tight liquidity in the banking system) and lower demand for cash. Both are results of ongoing monetary policy tightening by the CBR.
Alexey Moiseev, Maxim Oreshkin, Daria Isakova, Dmitri Fedotkin
VTB Capital analyst
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