Expansion of the List of Instruments of the Monetary Policy of the Bank of Russia

On April 9, the Bank of Russia reported that starting from April 10, 2012 the system of instruments of the monetary policy of the Bank of Russia would be supplemented with deposit auctions for the term of one week with the maximum interest rate of 4.75% per annum.

It is to be noted that starting from April 17, 2012 the Bank of Russia intends to carry out on a weekly basis on Tuesdays operations on a auction basis for the term of one week in one direction: either provision of cash funds (a direct REPO auction and Lombard facility), or absorption of liquidity (a deposit auction introduced from April 10).

According to representatives of the Central Bank of the Russian Federation, such decisions should contribute to limitation of volatility of interest rates of the money market and raising of effectiveness of the interest rate policy of the Bank of Russia.

In our view, the above measure is in the line with the policy of the Bank of Russia as regards raising of the role of interest rates of the Central Bank of the Russian Federation in the monetary policy. The rates on deposit auctions help make an impact on the minimum level of the interest rate on the inter-bank lending market, while those on liquidity provision operations (direct REPO and Lombard loans), on the maximum level of the interest rate on the inter-bank lending market.

P.V. Trunin, PhD, economics, Head of the Monetary Policy Department