19.01.08

During the last week of December 2007, Russia’s monetary base increased by over 250 billion rubles. This is the highest jump ever recorded by the Central Bank of Russia. As a result, prices are expected to grow by over 2% in January. According to the publication by the Central Bank, the basic monetary base volume as of January 1, 2008 was 4.26 trillion rubles (versus 4.01 trillion rubles on December 24, 2007). Altogether, the monetary base grew by 472.1 billion rubles in December, 2008. During the year 2007, it grew by over 1 trillion rubles.

The basic monetary base includes money issued by the Central Bank (inclusive of the balance in held by credit organizations) and the balance of required reserve accounts of bank liabilities deposited in the Central Bank. Analysts see main reasons for such fast growth of the monetary base at the end of the year in traditionally high budget expenditures in December, individuals spending extra for New Year’s gifts, and also bonuses, premiums and advance salaries paid at the end of the year. Financial expert say that approximately 70% of monetary base is cash money. People withdraw funds from bank accounts, exchange currency savings, and take rubles to the stores. It is possible that in December the Central Bank had to mint additional rubles.

This phenomenon has happened in December in the past years as well. In December 2003 monetary base grew approximately by 15%, in December 2006 – by 16.7%, in December 2007 – by 11.2%. The beginning of the year, usually, reverses the process: monetary base decreases as cash gets transferred from stores to the banks. In January people receive fewer payments, budget expenses decrease. This year in January analysts expect the monetary base to decrease by 7-8%. Growth of monetary base along with “new-year’s” rise of tariffs of natural monopolies will inevitably lead to growing inflation in January. According to experts, it is expected to grow by 1.8-2.4% more this year then it did in 2007.

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