The Bank of Russia Specified Procedures of Determination of Interest Rates at Auctions

On February 24, the CBR informed of specification of procedures of setting minimal interest rates at the direct REPO auctions for the term of 1 day and 1 week. Previously, the said rates were changed relatively rarely (as a rule, simultaneously with changes in the refinancing rate) and were approved by the CBR’s Board.

In compliance with the new procedures, the Bank of Russia will set the rates in a daily mode for the auctions for the term of 1 day (effective as of February 24) and weekly for the auctions for the term of 1 week (since March 3) at the level of not lower than that of the rates that are determined by the CBR’s Board.

In all likelihood this step is aimed at extending the CBR’s possibilities to exercise an immediate regulation of the situation on the monetary market. As a reminder, presently the direct REPO auctions form one of major sources of completing liquidity of the national banking system. Hence the CBR’s interest rate policy has a strong impact on Russia’s financial system as a whole and the market for forex in particular. In the situation of financial instability and rapidly changing conditions of the economy’s functioning the monetary and credit regulatory agencies should have a possibility to promptly react to changes of the external environment.

P. Trunin, Head, Department of the Monetary and Credit Policy