In June and at the beginning of July the rate of inflation declined, but remained above the target range and as of 8 July 2013 was estimated at 6.6 percent over a year ago. Core inflation in June amounted to 5.8 percent. Observed pace of inflation is mainly explained by the dynamics of food prices and regulated prices and tariffs. According to the Bank of Russia projections based on the assumptions of maintaining the current monetary policy stance and absence of adverse food prices shocks, the rate of inflation will return to the target range during the second half of 2013.
The dynamics of the key macroeconomic indicators points out that the pace of economic growth remains low. At the same time the decrease in the growth rates of certain indicators recorded in May was partly attributed to the calendar effect. Labour market conditions and credit dynamics are still providing support to the domestic demand. According to the Bank of Russia estimates, the risks of further economic slowdown remain given the weak investment activity and the sluggish recovery in external demand.
The Board of Directors of the Bank of Russia also decided to set effective from 15 July 2013 the minimum interest rate on the auctions for provision of loans, secured by non-marketable assets and guarantees, for 12 months term with floating interest rate at the level of 5.75 percent. The development of the system of the Bank of Russia monetary policy instruments, implemented by this decision, will contribute to strengthening the interest rate channel of the monetary policy transmission mechanism.
The Bank of Russia will continue to monitor inflation risks and the downside risks to economic growth. In making monetary policy decisions the Bank of Russia will be guided by the inflation goals and economic growth prospects.