Ku­drin urges Bank Ros­sii to avoid act­ing on in­fla­tion

The Pak Banker - - Company+Boss News -

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

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