National Bank: the effectiveness of inflationary policy in question

At the end of October, the Board of Directors of the Bank of Russia (Central Bank) decided on the sharp (50 basis points) decrease in the key rate to 6.5% per annum.


  • more rapid slowing of inflation compared to the forecast;
  • the decline in inflation expectations of the population;
  • the prevalence of disinflationary risks on proinflationary on short-term horizon.

Analysts of the Central Bank lowered its forecast of annual inflation by the end of this year with a 4-4. 5% to 3.2-3.7 per cent. Next year, according to their estimates, inflation will reach 3.5-4% and will remain at about 4%.

The national Bank on October 28 decided to keep the base rate at 9.25 percent.


  • dynamics of annual inflation in September (when it fell compared with August to 5.3%);
  • the behavior of inflation in accordance with predicted estimates;
  • the inflation expectations formed close to the actual level.

According to analysts of the national Bank, by the end of the year inflation is expected to rise to 5.7-5.8% and in the following year will remain within the target corridor of 4-6%.

What went wrong?

When statistics of the two countries announced official data on the dynamics of potreban October, it became clear that inflation in Russia and Kazakhstan have changed in different directions. The recent decision of the Bank of Russia at a rate well within the consistently pursued policy of inflation targeting and its predictions. Since the annual inflation in the neighboring country fell from September’s 4% to 3.8%.

As follows from the data of Rosstat, in the first month of autumn, consumer prices rose only 0.1%. While food prices rose 0.2%, non 0.3%. Prices for paid services for population decreased by 0.2%.

In annual terms prices of these items increased respectively by 4.2% and 3.2% and 3.8%.

100297d97477882ba6bcd09002f5922d - National Bank: the effectiveness of inflationary policy in question

The decision of the national Bank to keep the base rate at the September level was not quite timely. Indeed, in October, annual inflation rose in September from 5.3% to 5.5%. Moreover, returned to the August level.

In addition, the October inflation in Kazakhstan was much higher than the Russian. So, food products, compared with September rose by 0.9%, non – 0,5%, paid services for population – by 0.2%.

When counting in annual terms, Kazakhstan is far ahead of Russia in the rate of growth of food prices (9.7%) and nonfood (5,2%) products.

Thus, once again confirmed that the national Bank, unlike the Bank of Russia, cannot effectively pursue a policy of inflation targeting.

48e6b02f3efdb0207536cd215c45f34e - National Bank: the effectiveness of inflationary policy in question

Following a decision on the base rate of the national Bank will take on 9 December, the Bank of Russia on 13 December.

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