UPDATE: Russian cbank to keep moderately tough policy in 2017–2019

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MOSCOW, Sep 28 (PRIME) -- Russia’s central bank will keep a moderately tough monetary policy in 2017–2019 even if an optimistic scenario of the country’s economic development is implemented, according to the regulator’s draft for the next three years seen by PRIME on Wednesday.

The optimistic scenario implies gradual growth of oil prices to U.S. $55 per barrel in 2019.

On the one hand, the ruble’s strengthening on the back of the anticipated oil price growth will curb inflation, but on the other hand, higher revenues of economic agents and resumed demand will lead to higher consumer spending, which will spur inflation, the regulator said.

“Nevertheless, the restraining influence of the currency rate dynamics on inflation in this scenario will be implemented faster, which will ensure inflation approaching the target of 4% in the second half of 2017 and will create possibilities for a slightly faster reduction of the key rate with the retention of a moderately tough monetary policy,” the central bank said.

Under the bank’s risky scenario, oil prices will fall to $25 per barrel by 2017 and will remain low until the end of 2019, the regulator said. In this case, the gross domestic product (GDP) can contract 1–1.5% in 2017, 0.1–0.5% in 2018, and grow 1.3–1.7% in 2019. Inflation will stand at 5–6% in 2017, 4.0–4.5% in 2018, and 4% in 2019. The net private capital outflow will amount to $35 billion in 2017, $32 billion in 2018, and $25 billion in 2019.

The central bank may resume currency purchases to replenish reserves to the target level of U.S. $500 billion if the optimistic scenario is implemented, it also said. This level can ensure stable functioning of the economy amid unfavorable foreign economic conditions and international sanctions, the regulator said.

“The central bank does not set terms for reaching a $500 billion level of international reserves, because the current level of reserves is already comfortable enough, and the central bank regularly replenishes them through buying gold on the domestic market,” the regulator also said.

The country’s foreign exchange and gold reserves stood at $396.6 billion as of September 16.

Deputy Chairman Dmitry Tulin said that the central bank will coordinate its actions with the Finance Ministry during purchases of foreign currency for its reserves.

Tulin also said the bank does not aim to increase the share of gold in the country’s foreign exchange and gold reserves.

Anton Navoi, deputy director of the central bank’s strategy department, said the regulator will buy around 200 tonnes of gold I 2016 to replenish its reserves. The bank purchases 208 tonnes of gold in 2015, he added.

The central bank will hold eight meetings in 2017 to discuss the key rate level, it said. At its latest meeting earlier in September, the regulator reduced the key rate by 0.5 percentage points to 10%.

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