Friday, June 5, 2015

Alexander Mercouris — Russia's Recession: A Necessary Re-Balancing

...the Central Bank ever since 2012 has made it clear that its priority is inflation reduction over growth, with a medium term inflation target of just 4%. The Central Bank has also repeatedly made it clear that it will pursue a tough interest rate policy to achieve it however hard that is and however long it takes.
Experience of other economies with chronic inflation problems (such as Britain in the 1970s to 1990s) suggests that for inflation to be squeezed out of the system economic policy must be geared to that objective. This inevitably reduces growth, at least in the short term.

That seems to be the situation Russia is in now. It has been clear since 2012 that the Russian authorities have prioritised inflation over growth....
Russia Insider
Russia's Recession: A Necessary Re-Balancing
Alexander Mercouris

1 comment:

NeilW said...

You get inflation down by increasing production and competition in areas where there is price pressure.

Not by jiggering around with interest rates!