Monetary Policy of Bank of Russia: Strategy and Tactics

In recent years Bank of Russia has made several major changes in its monetary regime, including elimination of the exchange rate corridor and introduction of the key rate as the main monetary policy instrument. The article discusses these developments in the context of long-term priorities of the monetary authority. We put emphasis on the extent to which monetary policy should stimulate economic growth and assess whether the policy of the Central Bank of RF was excessively tight in 2010-2014. In order to do that we use the real interest rate on short-term loans in the interbank market as an indicator of monetary policy tightness. Cross-country comparisons together with the analysis of dynamics of selected indicators suggest that Bank of Russia’s policy was rather soft. We conclude with comments regarding tactics of monetary policy under current turbulent macroeconomic conditions.