Bank of Russia to factor new budget parameters into updated macro forecast

The Bank of Russia said it will incorporate new parameters from the government's budgetary policy into its upcoming update of the macroeconomic forecast, according to TASS.

The central bank's comments follow the release of new budget projections showing that the trajectory of the primary structural deficit over the next two years is slightly lower than the assumptions used in the Bank of Russia's July baseline forecast, according to the report.

The primary structural deficit is a measure used by the central bank to assess the underlying state of government finances, adjusted for one-off factors and the economic cycle, and factors significantly into decisions about monetary policy, including interest rate settings.

Why it matters

Revisions to fiscal deficit projections can influence a central bank's assessment of inflationary pressure and the overall stance it takes on interest rates, since government spending and borrowing plans feed into broader economic conditions. A lower projected deficit than previously assumed could, depending on other factors, ease some of the pressure central bank policymakers weigh when calibrating monetary policy.

The Bank of Russia did not specify in the reported comments when the updated macroeconomic forecast incorporating the new budget parameters would be published, or what specific changes to monetary policy, if any, might follow from the revision.