Monetary policy
guidelines for 2021–2023

Principles and goals

The Bank of Russia is following the inflation targeting regime. Its goal is to maintain price stability, that is, to keep annual inflation close to 4% on a continuous basis.

Low and predictable inflation is critical for households and businesses to make long-term plans, protects savings, incomes and investment against unforeseeable devaluation, helps reduce interest rates in the economy, and increases the affordability of borrowing.

Principles underlying Bank of Russia monetary policy are unchanged

Publicly announced inflation target

Key rate and communication as monetary policy instruments

Forecast-based decisions

Communication transparency


Baseline scenario

The baseline scenario assumes that the global economy will revive slowly. According to this scenario, Russia’s economy will resume a sustainable recovery in early 2021 and will reach its potential output in 2022 H1, maintaining this level until the end of the forecast horizon. Monetary policy will probably remain accommodative in 2021, gradually returning to the neutral stance in the second half of the forecast horizon as inflation stabilises at the target.

Annual inflation  
Gross domestic product  
Banking system claims on the economy in rubles and foreign currency  
 – corporates  
 – households  
growth, % YoY
2019 (actual) 2020 2021 2022 2023
3 3.9–4.2 3.5–4.0 4.0 4.0
1.3 -(4.0–5.0) 3.0–4.0 2.5–3.5 2.0–3.0
10.1 9–12 7–11 7–11 7–11
7.1 8–11 6–10 6–10 6–10
19 13–16 12–16 10–14 10–14

The Bank of Russia presents 3 alternative scenarios:

Proinflationary scenario

The proinflationary scenario assumes that demand dynamics will be similar to the assumptions of the baseline scenario but in the context of a significant decline in the economy’s potential. It also proceeds from the scenario assumption that the process of budget consolidation may take more time, ending in 2023. In this situation, the economy will return to a lower potential as early as in 2021 and will even slightly exceed it. In order to maintain inflation at the target – close to 4% – the Bank of Russia may need to temporarily shift to a moderately tight policy followed by a further return to the neutral one at the end of the forecast horizon.

Disinflationary scenario

Disinflationary scenario suggests the markedly slower rate (compared to the baseline scenario) of demand recovery which may take place if the pandemic continues and a significant volume of restrictive measures remain in place. The long period of moderate demand will exert a downward pressure on inflation. It will call for monetary policy remaining accommodative for longer period of time and, possibly, for its further easing in order to return inflation to the target

Risk scenario

Pursuant to the risk scenario, demand revival will be weak and potential will plummet. This scenario implies additional risks, specifically, rising geopolitical risks, trade tensions, and debt problems in individual countries or industries. As proinflationary risks intensify considerably, this will require a temporary significant tightening of monetary policy, with the shift back to the accommodative stance in the second half of the forecast horizon. Due to the large scale of shocks assumed under this scenario, it will take more time for inflation to stabilise at the target, which will happen slightly later than 2023.

Monetary policy in 2019 H2 – 2020

Key rate cuts in September 2019 – February 2020

The Bank of Russia continued easing its monetary policy. Overall, the key rate was cut from 7.25% to 6.00% per annum over the said period. This was needed to maintain inflation close to 4% over the forecast horizon. During these months, inflation was slowing down faster than it had been forecast. 

Key rate decrease paused in March 2020

By March, the situation in the global and Russian economies, as well as in global financial markets substantially deteriorated. Financial stability risks were up. Uncertainty about further developments increased considerably. In view of such a situation, the Bank of Russia made a decision to pause the key rate reduction.

Pursuing accommodative policy to stabilise inflation at the target by supporting domestic demand (April–October 2020)

In April, the Bank of Russia resumed the cycle of key rate reductions and shifted to accommodative monetary policy. Over the four months, the key rate was cut to 4.25% per annum. In September and October, the Bank of Russia decided not to change the key rate, maintaining accommodative monetary policy.

Future monetary policy

In the case of the baseline scenario, the Bank of Russia will consider the necessity of further key rate reduction at its upcoming meetings. Over the medium-term horizon, as the economic situation returns to normal and inflation stabilises close to 4%, the Bank of Russia will estimate a possible time and pace for returning from accommodative to neutral monetary policy where the key rate will stay within a neutral range of 5–6% per annum.

Expansion of communication

Due to rising uncertainty, the clarity of communication and the openness of the central bank are gaining significance. To be able to address new challenges, the Bank of Russia has taken a number of new steps.

Increase in the number of press conferences

The Bank of Russia started to hold the Governor’s press conferences after each key rate meeting.

Expanded regional communication

In September, the Bank of Russia started to publish its information and analytical commentaries on inflation in every Russian region. Thus, the Bank of Russia now provides the analysis of consumer price trends at all the three levels: in Russia in general, the federal districts, and individual regions. In the future, the Bank of Russia is going to publish a summary overview of the materials released by its regional branches on the current economic situation in Russian regions.

Modified communication of the forecast

The Bank of Russia is exploring formats for more detailed communication of our forecast. Based on these discussions, we are going to publish the forecast in a more expanded format, including options for publishing the projected path of the key rate.

Use of monetary policy instruments

The operational objective of the Bank of Russia’s monetary policy is to keep overnight money market rates close to the key rate. Amid the structural liquidity surplus observed in 2020, they have been forming close to the key rate, prevalently in the lower half of the Bank of Russia interest rate corridor.