Kudrin urges Bank Rossii to avoid acting on inflation
MOSCOW: Russia's central bank shouldn't take steps to offset faster inflation because "monetary measures" won't help contain price growth caused by drought and crop losses, Finance Minister Alexei Kudrin said.
"So far this inflation is caused more by drought conditions, and that's why monetary measures won't have a major effect," Kudrin told reporters on a flight from Moscow to Yakutsk over the weekend. "What's most important is not to speed up expenditures. That's the main task, and the rest will gradually come into balance."
Consumer-price growth may accelerate to as much as 7.5 percent this year and reach between 6 percent and 7 percent in 2011, Kudrin said. Central bank First Deputy Chairman Alexei Ulyukayev said in June that inflation may slow to below 6 percent.
Bank Rossii has cut its main interest rates 14 times since April 2009 as inflation slowed to 5.5 percent in July, the lowest level on record. It kept the refinancing rate at a record low 7.75 percent last month and plans to hold a rate meeting tomorrow. Consumer prices rose 8.8 percent in 2009.
Russia's worst drought in half a century will cost the economy as much as 0.8 percentage point of growth this year, the Economy Ministry estimates. Record heat sparked forest fires as crops withered across Russia, prompting the government to ban grain exports until at least the end of the year. Heat, drought and fire have hobbled agriculture, which accounts for about 4 percent of Russia's gross domestic prod- uct, according to Moscowbased VTB Capital.
The heat wave may cost Russia about 1 percent of GDP because of the greater impact of agriculture on economic performance in the second half, Kudrin said. Even so, the economy will expand about 4 percent this year, Kudrin said, matching an earlier Economy Ministry forecast. The benchmark refinancing rate is at an appropriate level and shouldn't be changed in response to accelerating inflation, Kudrin said, adding that the regulator doesn't need to "do anything special now." "The central bank should conduct a flexible exchangerate policy," Kudrin said. "As far as liquidity is concerned, it's conducting its normal policy of accumulating on its deposit accounts the large spare resources of banks. -PB News