The Bank of Russia compared the IMF to a “turtle” because of the speed of issuing recommendations

The International Monetary Fund (IMF) is issuing its recommendations too slowly, an example of this is the dubious advice to lower the key rate below 4% per annum, said the first deputy chairman of the Bank of Russia Sergei Shvetsov at a meeting of the Just Russia faction in the State Duma.

“We received a dubious recommendation to cut rates last fall. The IMF is a turtle that takes a long time to issue its recommendation. And it looks like they were analyzing the data for the period leading up to fall – summer or spring. Thank God, we are not obliged to follow their recommendations, ”he said (quoted by TASS).

According to Shvetsov, after receiving the IMF’s recommendation, the Central Bank “smiled and did everything right”: they raised the key rate, thereby ensuring price stability in the economy. The representative of the regulator explained that the advice of the fund should be followed only by those who have monetary obligations to it. The Central Bank has extinguished them a long time ago, so I shouldn’t follow such recommendations, they “are given not only not persistently, but in passing”.

Since July last year, the key rate in Russia has been at a historically low level of 4.25% per annum. The Central Bank lowered it to such a value to stimulate demand in the economy amid the coronavirus pandemic and related restrictions. However, at the end of 2020, consumer demand in the country began to recover, and inflation began to accelerate. Already in January, for the first time since the first half of 2019, it crossed the threshold of 5% with a target of 4%.

Despite this, the IMF recommended the Central Bank to reduce the key rate to 3.75% per annum. Analysts justified this by the need to prevent the rate of price growth in Russia from slipping below the target, and they called their acceleration temporary.

Nevertheless, at a meeting on February 12, the Central Bank left the rate at 4.25%. On March 19, the regulator’s board of directors increased it for the first time since December 2018 – by 0.25 percentage points, and on April 23 – by another 0.5 percentage points. Thus, the rate is now at the lower border of the neutral and amounts to 5%. The Central Bank explained its decision by shifting the balance of risks in the economy towards pro-inflationary ones, as well as by the fact that the recovery in demand in some sectors outstrips the possibility of increasing output.

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