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Lower inflation remains Russian central bank's priority: First Deputy Governor

[MOSCOW] Russia's central bank continues to see lowering inflation as its priority, but needs to take into account how its policies impact the real economy, the bank's new head of monetary policy said in an interview cleared for publication on Thursday.

In his first public comments since his appointment in January, First Deputy Governor Dmitry Tulin said "all our instincts and acquired reflexes are triggered first of all by inflation."

Mr Tulin's appointment has fuelled speculation that the bank is softening the hawkish anti-inflation policies associated with his predecessor Ksenia Yudayeva.

His appointment was quickly followed by a surprise two-point cut in the bank's key lending rate to 15 per cent from 17 per cent - a move criticised by some analysts as premature given high and rising inflation.

But Mr Tulin rejected such criticisms, stating that the bank remains committed to bringing down inflation - presently over 16 per cent - to low single digits by the end of 2017.

He said that the most recent macroeconomic data, particularly figures showing sluggish money supply growth, showed that the bank's monetary policy was tight enough to reduce inflation despite a temporary spike.

"Based on February data our policy remains tight," he said, but added: "We need to wait until the March meeting - there will be new information, new data, consumer polls, their expectations."

The central bank is to meet on March 13 to decide on rates.

Mr Tulin also said that there are "indirect" signs that inflationary expectations are declining, reiterating that inflationary expectations remain a chief factor for deciding on the level of the key rate.

He added that "nothing terrible" will happen if inflation reaches 20 per cent in the second quarter, as the bank still expects inflation to decline soon, reaching 10 per cent in the first quarter of 2016.


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