sepheronx wrote:Wait, I am curious....Do they account Crimea as well into their measurements?
That is a good point. If they don't, the West will be all over it like hawks and put their propaganda machine in full motion to report something along the lines of: "Russian economy doesn't consider Crimea to be part of it".
Back on-topic: As I understand, everyone here supports the idea of dropping interest rates. So if there are only benefits, why is the Central Bank holding it off? Maybe they are scared it will accelerate the rouble's depreciation again?
Kudrin wasn't the only monetarist in the Russian financial system. The CBR has many true believers whose whole reference frame
was created by the Harvard Boys (e.g. Jeffrey Sachs) back during the 1990s. They really swallowed the monetarist koolaid even
though the ones peddling it don't believe in it.
So the CBR sees inflation where there is none and sees risk of inflation under every bed. In the process it is stifling the Russian
domestic investment capacity.
By now it is clear that the rouble is not going to collapse. The fall to over 70 to the dollar was a hysterical spike created by
speculators trying to milk the CBR intervention money. Once the CBR floated the rouble and stopped wasting money propping
up the exchange rate, this whole racket just died. I think a good target for the ruble exchange rate is 60:1 to the dollar. This
can be achieve easily by dropping the interest rates.
I the CBR had more than paranoia to back up its interest rate policy, then we would have seen a sustained bout of inflation starting
after the rouble devaluation. But the inflation spiked and then fell back to March 2014 levels in March of 2015. Clearly there is
no inflationary pressure in Russia that needs to be combated. The rouble has not gone back to 35:1 to the dollar yet the inflation
has disappeared. The CBR justifies its whole policy based on inflation rates, so these inflation figures are real. Too bad the CBR
is too blinded by monetarist voodoo thinking to get the hint.