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Shvetsov on monetary policy


Last Friday, Interfax quoted CBR Deputy Chairman Sergey Shvetsov about planned modifications to the regulator’s monetary policy.

Refinancing toolkit. Shvetsov again confirmed that the one-year refinancing facility at floating rates (close to the one-week auction repo rates (5.50%)) would be launched in 3Q13.

Inflation target. The regulator sent an idea to the government about shifting the CBR’s CPI target from the current range to a fixed point with allowable deviations.

At the moment, the rates on the CBR’s medium-term refinancing facilities vary from 6.50% (3m repo auction-based rate) to 7.50% (6-12m loans under 312-P regulation). Thus, there is plenty of room to make the CBR’s refinancing curve flatter. However, Shvetsov did not provide details about whether the floating rates would apply to the repo facility or to the CBR’s loans backed by non-traded collateral. If he was only referring to the repo facility, that would not really help to alleviate money market tightness because available collateral is still scarce in the banking system. However, if it includes the 312-P facility, that would result in increased refinancing volumes through the facility and, thus, lower the repo utilisation level, bringing the premium of the money market rates over the auction repo rate significantly lower than the current range of 50-100bp.

On the inflation target, Shvetsov recently mentioned explicitly that the CPI target for the next two-three years was planned at 4.5% +/-1.5 percentage points. To recap, we see the 4.5% target as the optimum for Russia: if achieved on a constant basis, it would mean low and stable inflation, but still with room for structural shifts in the economy.

Maxim Oreshkin, Daria Isakova
VTB Capital analyst

CBR, inflation, CPI

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