kvs wrote:Kimppis wrote:http://theduran.com/russias-inflation-better-central-bank-target/
Alexander Mercouris: Russia’s inflation fall exceeds Central Bank target
Russian inflation rate plunges to 4.5%, opening the way to cuts in interest rates and higher growth this year.
Rosstat, Russia’s state statistical agency, is reporting that the annualised inflation rate in Russia has now fallen to 4.5%, with Russia recording increasingly frequently weeks of zero inflation during the winter months.
This is most unusual. Normally the inflation rate rises in Russia in the winter and falls in the summer. The fact that Russia is now regularly recording weeks of zero inflation even in winter shows that inflation in Russia is falling faster than anyone (myself included) expected.
Suffice to say that less than a year ago the Russian Central Bank was predicting that inflation in Russia would not fall to 5% before April and would finally hit the 4% target at the end of the year. Inflation has instead fallen to 4.5% less than midway through March, with some forecasts now predicting it will hit the 4% target by mid-year. Indeed there is now a serious possibility that inflation for the whole year could significantly over-shoot the Central Bank’s target and fall significantly below 4%.
This plunge in inflation is crucial for the economy’s future. As I have repeatedly pointed out, it is the sky high interest rates (currently 10%) the Central Bank has been imposing to achieve the 4% inflation target which caused Russian economic growth to slow from mid 2012. Far more than low oil prices it is these high interest rates which are continuing to hold the economy back. There is a direct historic correlation between the rise of Russian interest rates since the Central Bank began serious inflation targeting in 2012, the decline in inflation in Russia, and the fall in Russia’s GDP growth rate, even if most commentators are blind to it and even if the Central Bank itself downplays it. I have discussed all this in detail previously here.
What this means is that the sooner and faster inflation falls, the sooner the Central Bank will start to cut interest rates, and the more Russia’s GDP growth rate will increase.
If inflation really does fall to an annualised rate of 4% by mid-year then even the inflation hawks in the Central Bank will most probably finally come to accept that a Central Bank lending rate of 10% is too high, in which case interest rates will start to come down faster, and Russia’s economy will start to grow more quickly, than even the most optimistic forecasts have been predicting.
I like Mercouris but here he is just spouting nonsense. Faking an inflation rate by brutal credit contraction such as what the CBR has been doing is
BAD for the economy. Since it is not a natural, quasi-equilibrium decline, there will be the inevitable overshoot and it will rebound. So I fully
expect the inflation rate to start climbing fast as soon as the CBR reduces its rates to let's say 5% (a dream). Theses f*cks at the CBR are the sole
source of both the inevitable inflation disaster and the criminal policy of maintaining the prime lending rate at 10.5% even when the inflation was below
8% for two years. The prime lending rate should have been 6% during this time.
Putin has failed big in dealing with the economic sabotage at the CBR. He should have organized a regime change at the CBR. People always talk about
checks and balances. Well, the CBR has none. It has been taken over by monetarist loons who are proving that they are also 5th columnists.
If forumers like us can see how the CBR is sabotaging Russian economy, im pretty sure Putin and his advisers would notice it too, But why are they not doing anything?