INFORMATION OF DEPARTMENT FOR EXTERNAL AND PUBLIC RELATIONS OF CENTRAL BANK OF THE RUSSIAN FEDERATION

of September 13, 2013

About system of percentage instruments of monetary policy of the Bank of Russia

The Department for External and Public Relations of the Bank of Russia reports that on September 13, 2013 the Board of directors of the Bank of Russia within transition to the mode of targeting of inflation made the decision on realization of package of measures for enhancement of system of instruments of monetary policy. These measures include:

1) introduction of key interest rate of the Bank of Russia by unification of interest rates for transactions of provision and absorption of liquidity on auction basis for the term of 1 week;

2) forming of corridor of interest rates of the Bank of Russia and optimization of system of tools on regulation of liquidity of banking sector;

3) change of role of refunding rate in system of tools of the Bank of Russia.

The specified actions will allow to increase transparency of monetary policy and to improve her understanding subjects of economy that will promote strengthening of effectiveness of percentage and information channels of the transmission mechanism of monetary policy and achievement of ultimate goal on ensuring price stability.

1. Corridor of interest rates of the Bank of Russia

The solution of the Board of directors of the Bank of Russia on equalization since September 16, 2013 of maximum interest rate on deposit transactions on auction basis for the term of 1 week with the level of minimum interest rate on transactions of provision of liquidity on auction basis for the term of 1 week, and also about interest rate reduction on the credits "overnight" and on the credits provided with non-market assets or guarantees to the level of interest rate for transactions of provision of liquidity of permanent action for the term of 1 day (annual interest rate 6,50 for September 13, 2013) is the finishing step in forming of corridor of interest rates of the Bank of Russia which basic element will be key interest rate of the Bank of Russia.

The Bank of Russia announces key interest rate of monetary policy interest rate for transactions of provision and absorption of liquidity on auction basis for the term of 1 week (annual interest rate 5,50 for September 13, 2013). The Bank of Russia intends to use key interest rate as the main indicator of orientation of monetary policy that will promote improvement of understanding by subjects of economy of the decisions made by the Bank of Russia.

By January 1, 2016 the Bank of Russia will correct refunding rate to the level of key interest rate. Before the specified date the refunding rate will be of secondary importance.

Rates on transactions of the Bank of Russia of permanent action for absorption and provision of liquidity for the term of 1 day form, respectively, lower (annual interest rate 4,5 for September 13, 2013) and upper (annual interest rate 6,5 for September 13, 2013) the borders of percentage corridor symmetric of rather key interest rate. In case of adoption by the Bank of Russia of the decision on change of level of key interest rate of border of corridor will move automatically at size of its change. The Bank of Russia determined width of percentage corridor in 2 percent points. The specified width of corridor is considered as optimum for restriction of volatility of interest rates of the money market when preserving incentives to funds redistribution in the interbank market.

2. System of percentage tools of the Bank of Russia and measure for its enhancement

Determining percentage corridor as basis of system of interest rates of monetary policy, the Bank of Russia at transitional stage in 2014 will continue to take the measures directed to optimization of system of percentage tools including reduction of their number and elimination of duplication.

Transactions of the Bank of Russia on auction basis for the term of 1 week will remain the main instruments of regulation of liquidity of banking sector. At the same time for the purpose of creation of conditions for more active funds redistribution in the interbank market and increases in effective management of own liquidity by credit institutions since February 1, 2014 the Bank of Russia will stop carrying out on daily basis of the repo auctions for the term of 1 day and will use repo operations on auction basis for the terms from 1 to 6 days as the instrument of "thin setup". In case of need of compensation of effects of sharp changes of level of liquidity of banking sector owing to action of autonomous factors or shifts in demand of credit institutions on liquidity the Bank of Russia will quickly make the decision on carrying out the specified transactions.

Provision of liquidity on the fixed conditions will be performed for the term of 1 day under different types of providing (securities, rights to claim according to credit agreements, bills of exchange, guarantees, gold, foreign currency) at the single rate forming the upper bound of percentage corridor. Since February 1, 2014 the Bank of Russia will suspend carrying out all transactions of permanent action for the terms over 1 day.

 Besides, from the specified date carrying out the following regular transactions of provision of liquidity on auction basis will also be suspended: lombard auctions for all terms and the repo auctions for the terms of 3 and 12 months.

In addition to the main transactions of regulation of liquidity on auction basis and to transactions of permanent action the Bank of Russia on regular basis will hold auctions for loan granting, provided with non-market assets, on floating interest rate for the term of 3rd month. As floating component when calculating cost of the loans granted to credit institutions by results of credit auctions value of key interest rate of the Bank of Russia will be applied. The minimum spread to the level of key interest rate will be established by the solution of the Board of directors of the Bank of Russia (now constitutes 0,25 of percent point) (Information "About carrying out credit auction by the Bank of Russia on provision to credit institutions of the credits of the Bank of Russia provided with non-market assets on floating interest rate"). Use of these transactions by credit institutions will allow to release partially the market providing received by the Bank of Russia on the main transactions of provision of liquidity that will promote improvement of functioning of the money market. At the same time carrying out transactions on floating rate will allow to increase the clearness of signal of percentage policy because change of key interest rate of the Bank of Russia will be broadcast in change in value of the means which are earlier issued by the Bank of Russia to credit institutions.

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