Section 2. Monetary and Fiscal Policies

In 2015, the Bank of Russia faced global challenges while implementing measures as part of its monetary policy. The economic situation in 2015 was marked by the following: Western sanctions and Russia’s countersanctions remained in effect, prices of Russia’s key export commodities continued to fall, economic agents’ expectations for high inflation remained intact. The sweeping depreciation of the Russian ruble in late 2014/early 2015 resulted in an inflation shock which kept the year-end inflation at high level: the Consumer Price Index (CPI) stood at 12.9% at the 2015 year-end, much higher than the 2017 mid-term target level (4%) set forth in the central bank’s Guidelines for the Single State Monetary Policy for 2015–2017. In its official 2015 forecast, Russia’s Ministry of Economic Development predicted inflation will not move beyond 6.3% in late 2014/early 2015, and Russia’s central bank expected it to stay at 8.2–8.7% under the baseline scenario and 9.3–9.8% under the risk scenario. At the same time, the Bank of Russia cut its key rate gradually from 17% in January down to 11% in December 2015 as inflation slowed down over the course of the year.