The Bank of Russia is Increasing Information Transparency

On December 3, the Bank of Russia started to publish the forecast of factors underlying the formation of banking sector liquidity.


The forecast highlights the following four key factors: changes in the volume of cash in circulation (outside the Bank of Russia), changes in the balance at the accounts of the extended government with the Bank of Russia, and other operations; the Bank of Russia regulation of credit institutions’ mandatory provisions; balance of the Bank of Russia operations in liquidity provision / withdrawal.

Note that the RF Central Bank has not explicitly include in the factors of liquidity changes  in the foreign exchange market operations, which were playing an important role in the formation of the banking sector liquidity for a long period up to 2010. Currently the Bank of Russia in the framework of transition to a regime of inflation targeting is minimizing its intervention in the foreign exchange market. As a result, foreign exchange operations do not significantly affect the monetary supply any more.

Currently, the main sources of liquidity are the Bank of Russia operations in refinancing credit institutions. However, according to the published forecast, in the period from December 5 - 11 the Central Bank expects liquidity withdrawal in the amount over Rb 1.5 trillion as a result of its operations, apparently performed in view of the monetary market preparation to a significant extension of budget expenditures at the end of year, causing an upsurge of liquidity.

In general, publication of such a forecast is most welcome. It will enhance the RF CB information and monetary policy transparency, increase confidence of economic agents in the policy of the Central Bank.

P.V. Trunin, Ph.D. in Economics, Head of Monetary Policy Department