Improving monetary policy of central bank: modern challenges

Центральный Банк РФ, стимулирующая политика банк, концентрация, конкуренция, кредит, эффективность.

IMPROVING MONETARY POLICY OF CENTRAL BANK: MODERN

CHALLENGES

Financial University under the Government of Russian Federation, Moscow

Scientific supervisor:

Burakov D.V., PhD in Economics, Senior Lecturer, Department “Financial Markets and Banks”, Financial University under the Government of Russian Federation, Moscow

This paper is dedicated to the research of monetary policy of the Central Bank of the Russian Federation. It is necessary to determine its further direction in order to achieve economic growth of our country.

Russian Federation, stimulating policy.

In order to more clearly understand the specific challenges that stand before the Bank of Russia one should describe the situation in the field which the change in the key rate affects to a greater extent. This is the credit market.

On the question of why we successfully grew in the period from 2011 to 2014, despite the slowdown in the last two years, I would give the following answer: let’s look at the dynamics of the main indicators of the banking sector. For most of them there was growth from 2011 to 2013, in 2014 - slowdown, and in 2015 – a decline. It turns out that we have evolved through growing lending. Actually, this is a good idea, recently mentioned by Glazev, not to mention the fact that the loans boost economic growth. Regarding the retail loan portfolio, from 2011 to 2014 it has grown from 7.3 trillion. rubles to 11.3 trillion. rubles, and in 2015, fell to 10.7 trillion. rubles. What are the causes? We finally got the growth of debt load of the population, which did not appear so clearly, when the revenues were growing up, or at least were stable. So live the US. But in 2015, the growth of real incomes of the population observed prior to 2014 gave way to fall. The unemployment rate, including hidden, had begun to grow because inflation and the devaluation of the ruble increased costs of current consumption. [1]

According to Rosstat, the average income per capita for the first half of 2015 amounted to approximately 31 thousand rubles. The income of nearly half the population (45 %) is below one-third and equals to 19 thousand rubles. The stagnation of the economy led to a sharp rise in poverty. In the first half of 2015 on incomes below the subsistence minimum lived 21.7 million Russians (15 %). In the same period in 2014, the poverty line was 13 % of the citizens (their number increased by 2,8 million people).

This primarily increases the non-payments and late payments. The industry average according for 2015 equals the loss of 17.62 % of the total retail portfolio, which is higher than in the period 2008-2009, when the figure was in a dense close to 10%, but never overstepped the mark. In some banks these figures are more critical, such as, for example, in the Bank "Russian standard" it is close to 30 %, and at "Tinkoff Bank" is 21 %, according to the newspaper "Vedomosti". Experts say that the current state of the loans portfolio in 2012 -early 2014, when no one really did expect such a strong reduction of incomes of the population. The total volume of overdue retail debts in mid-September 2015, equals to about 1.04 trillion. rubles.

Speaking of corporate lending, as it also contributes its share in the total loan portfolio, it should be noted that corporate lending feels really better and since 2012 the upward trend, and in 2015 reached the level of index at 30.2 trillion rubles. [2,3]

As a result, banks deduct funds for the creation of reserves, particularly foreign exchange transactions, as a high proportion of defaults. In terms of sanctions, banks lost the opportunity of funding abroad for a long time, and the volume of foreign loans by banks declined from 167,3 billion at the end of 2013 to 126,5 billion in July of 2015. Also, due to growing discontent and mistrust of the population. According to the Bureau, only 56 % of the population now trust banks, and in 2013, this indicator was at 80%.

In the end, the banking sector in addition to its internal problems has, shall we say, high interest rates, making refinancing from the Central Banks more expensive. Amid draining monetary base, which, according to S. Glazyev, the Bank of Russia is ready to reduce by 29% over 4 years, and the already mentioned high rates of shrinking liquidity in the banking sector that reduces the amount of the loan. In terms of under monetized economy a monetary contraction leads to a drop in production and investment, which in turn accelerates inflation. If one imagines a graph of supply and demand, this situation shifts the curve to the left up past that, as has been said, reduces the amount of goods and pushes prices up. Further vicious circle. The manufacturer wants to try to somehow reduce prices in order to sell the product, and the first thing he goes is to decrease the number of workers or lower wages. It all leads to falling incomes, which is what we see in reality and so people buy less goods, which will further hit sales.

We must not forget that the economy is a living organism where everything is interconnected.