The monetary authorities have decided on how they are going to deal with the main economic misfortune of this year - high inflation. After a long discussion, a decision was made on the transition to inflation targeting, which is from now on in the official document of the Ministry of Finance and the Bank of Russia. The New Times tried to figure out what the consequences of this decision could be
Recently, a lot has been said about inflation and methods of combating it. The recipes were offered very different - up to freezing prices for socially significant products. This did not have a tangible effect: prices continued to rise. This once again confirmed the justice of the position of the Ministry of Finance, which consists in the fact that it is possible to effectively fight inflation only by regulating the money supply. So, the main headquarters of this struggle is the emission center - the Central Bank of Russia. In turn, the leadership of the Central Bank every time indicated that counteraction to price growth is an important, but not its only task. Another priority is to ensure the stability of the ruble.
However, now the accents are placed. The “main areas of the Unified State Monetary Policy for 2009-2011”, a document that has been prepared by the Ministry of Finance together from the beginning of the year, says: “The Bank of Russia intends to mainly complete the transition to the inflation targeting regime, which involves the priority of the target to reduce inflation.” Next year, it is planned to reduce price growth rates to 9.5%, and by 2011 to 5-6.8%.
Barrier from the side
Since the mid-90s, when the government struggled with high inflation, the mild binding of the ruble to the dollar has been one of the important mechanisms for holding prices. Using the so -called currency corridor, the monetary authorities actually guaranteed a smooth reduction in the exchange rate of the ruble and imported lower inflation. Even the devaluation of 1998 in reality has changed little. The Central Bank only rearranged the target values of foreign exchange rates at new, higher levels and refused to use the concept of “currency corridor”, moving from hard guarantees for holding the course to milder targeting 1 .
A significant drawback of the binding to the dollar was the fact that the United States is neither the main trading partner of Russia, nor even the main source of foreign investment. Russia has much closer economic ties with Europe. However, it was also wrong to switch to binding to the euro: after all, the main revenues from exports (for example, from oil sales) come in dollars. Therefore, since February 2005, the Central Bank began to focus on the bivalyut basket - a synthetic value in which, in addition to the American currency, there is a single European one. Initially, however, in the bivalyut basket on 90 American cents accounted for only 10 European. However, the share of the euro gradually increased to 45%, and the dollar dropped to 55%.
New model
Until recently, it seemed that the Central Bank should leave the foreign exchange market and stop buying petrodollars, as the American currency course would inevitably collapse. The numbers in assessments of the depth of this collapse were called a variety of, but most experts converged in 15-17 rubles per dollar. However, the latest events in the Russian foreign exchange market show that the ruble can not only strengthen, but also fall, and without any central bank's efforts directed at this. Of course, the fluctuations in the ruble course when refusing a rigid link to the bivalyut basket will increase, but the giant gold and foreign exchange reserves accumulated in recent years will help to smooth them out and avoid sharp collapses. The interventions of the Central Bank will simply cease to be a constant and main element of monetary policy, and will be used only in emergency cases, as practiced in developed countries.
An equally important consequence of the transition to inflation targeting is changes in the mechanism of monetary issue. If to date, rubles appear in the Russian economy thanks to the buying up the central bank of foreign currency, then with the abandonment of this practice, new mechanisms will have to be introduced. In developed countries, money comes to the economy thanks to the system of refinancing of the Central Bank of commercial banks, as well as lending to the government by the Central Bank. The liquidity crisis, which erupted in the world in August - last year, allowed the Central Bank to quickly create and test the refinancing system that existed in the country before that only as a theoretically possible model. And the refinancing rate began to turn from a fiscal abstraction into a valid instrument that allows you to regulate a monetary supply.
The bets are made
The experience of developed countries, more or less committed to the idea of inflation targeting, shows that manipulation of interest rates is an art that is not so simple to master. Higher rates mean expensive loans and, accordingly, fewer money in the economy. This allows you to restrain inflation, but poses a threat to economic growth. Accordingly, a decrease in bets, as a rule, leads to a revival of the economy, but is fraught with rising prices. This is all in theory. In practice, developed countries are currently faced with a phenomenon such as Stagflation. The crisis of financial markets led to a sharp slowdown in the USA, the European Union, Japan. However, a decrease in bets on the part of the Fed only led to pouting of bubbles in the raw materials and a sharp increase in inflation. At the same time, the expected changes for the better did not occur in the economy: the costs increased due to the growth of raw material prices in industry exacerbate the crisis. Thus, inflation targeting is a progressive measure compared to the current state of things. However, it is impossible to call this system a panacea that is able to solve all the overhead economic problems.
Alexey Kudrin, Deputy Prime Minister, Minister of Finance of the Russian Federation: accessibility for a long term and low loan rate-the so-called long money is a necessary condition and the most important component of the investment climate. And if we say that we advocate for diversification of the economy, for the departure of oil dependence, for the innovative economy, and at the same time we do not reduce inflation below 10-11%, everything that we say remains nothing more than empty conversations. There cannot be an investment economy at a 15 percent rate on loans issued for three years, and even then not everyone. This is the border of our investment climate. Therefore, reducing inflation is a priority task.
_______________
1 Targeting is a way of implementing the state’s economic policy, expressed in the choice of some specific economic “target”, which must be influenced in order to achieve certain results.
