The broad money supply narrowed by 5.94 percent in October of 2008, the Central Bank of Russia announced yesterday.
Photo: Pavel Soloviev
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Economy Loses the Money Weight
The broad money supply narrowed by 5.94 percent in October of 2008, the Central Bank of Russia announced yesterday. The economic analysts attribute the reduction to large-scale transition of Russia’s economy from rubles to foreign exchange, expecting the monetary compression to affect the inflation in the second half of 2009. On the other hand, the reduction of money supply may reveal the increased distrust towards the banking system.
Given the CBR statistics, the broad money supply (M2) narrowed by 5.94 percent in October of 2008, from 14.4 trillion ruble as of October 1, 2008 to 13.5 trillion ruble on November 1, 2008. The reduction was registered for the second consecutive month – M2 lost 1.1 percent on month in September.
As to M2 structure, the share of cash (M0) widened by 1.4 percent in October, while the non-cash share shed 8.7 percent. As of November 1, the growth rates of M2 lowered to 18.4 percent on year vs the growth of 25 percent posted in September. The CBR forecasts the money supply growth to slow down from 47.5 percent in 2007 to 28 percent by the annual results, but the actual drop could be even deeper in November, according to the October statistics.
The M2 reduction will lower inflation sooner or later, the economic analysts are sure. But the effect will be noticed with the lag of four to six months. At the same time, the injections of the CBR and Finance Ministry into financial system may affect the M2 movement in 2009 – the M2 reduction doesn’t mean the inflation will be low for certain, the analysts speculate.
www.kommersant.com
All the Article in Russian as of Nov. 26, 2008
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