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Bank of Russia and FAS of Russia set up system of response to growing prices in Russian regions

The Bank of Russia is working in close cooperation with the Federal Antimonopoly Service of Russia (FAS of Russia) to implement a competition development standard in the constituent territories of the Russian Federation. This will help, inter alia, set up a system of response to growing prices in Russian regions. For this purpose the regulator has signed an additional agreement with the FAS of Russia.

The Bank of Russia does not explicitly influence non-monetary factors of inflation such as competition among producers and retailers, logistics development, and available food product storage facilities. These factors may cause inflation to deviate from the target (near 4%).

The expansion of cooperation with the FAS of Russia with regard to the impact of imperfect competition on inflation will allow the Bank of Russia to identify the bottlenecks in specific commodity markets and in specific regions.

When significant deviations in the annual inflation from the 4% target, caused by accelerating growth in the prices of certain goods and services, are revealed, the Bank of Russia is supposed to apply to the FAS of Russia, which in turn will provide the information it has available, including that on competition in the commodity markets and their price dynamics. For this purpose, the parties have agreed to approve the working procedure.

This will help the Bank of Russia further identify stages where accelerating price growth is observed: production, transportation, storage or sale of goods. As a result of monitoring, the Bank of Russia will prepare expert recommendations for federal and regional executive bodies to reduce the influence of non-monetary factors on inflation.

The improved cooperation between the Bank of Russia and the FAS of Russia will make it possible to immediately respond to annual inflation deviations from the 4% target under the impact of non-monetary factors, thus creating conditions for its anchoring near the target.

Moreover, the agreement expands interaction between the Bank of Russia and the FAS of Russia in exercising control and supervision over compliance with the legislation on advertising, including that by financial institutions supervised by the Bank of Russia. If any violations of the legislation on advertising are discovered, the Bank of Russia will inform the antimonopoly bodies of this, which will in turn take the necessary measures. This will allow the Bank of Russia to make control and supervision over compliance with the legislation on advertising more effective.

4 October 2018

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