Putin wants new inflation targeting mechanism developed

NAYPYIDAW, Aug 28 (PRIME) -- President Vladimir Putin has agreed to Russia’s Economic Development Ministry teaming up with the central bank and the Finance Ministry to work out an inflation targeting mechanism, Economic Development Minister Alexei Ulyukayev told PRIME Thursday.

“I have received the president’s acceptance of this suggestion. Now we will work out (the concrete suggestions) jointly with the Finance Ministry, the central bank and presidential aides for economic issues,” Ulyukayev said.

The current central bank’s monetary policy sets the 2014 inflation target at 5%, 4.5% in 2015 and 4% in 2016, and the bank allows a maximum deviation from the target of 1.5%.

In July, the Economic Development Ministry suggested widening the inflation corridor by 1.5 percentage points to make central bank’s inflation targeting policy more flexible, after the regulator unexpectedly raised its key rate to 8% to curb inflation risks.

Ulyukayev also said it is necessary to change the country’s fiscal policy, budget rule, as the external risk factors are increasing.

The budget rule for 2014 stipulates that if oil prices exceed U.S. $93 per barrel, the windfall is saved in the Reserve Fund, and when the fund exceeds 7% of GDP – the money is transferred to the national wealth fund.

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