Russia Can ‘React Fast’ to CPI Risk, Bank Rossii’s Yudaeva Says

Russia’s policy makers can react fast to step up efforts to contain inflation as needed, Bank Rossii First Deputy Chairman Ksenia Yudaeva said.

“We can tighten our policy” if inflation stays high, Yudaeva said, reiterating the central bank’s Feb. 14 switch away from an easing bias. Consumer-price growth has remained above the central bank’s target of 5 percent for 17 months and was 6.1 percent in January from a year earlier.

“While of course we will wait and see, our intention is to do as much as possible to reach the target by the end of the year,” Yudaeva said in an interview in Sydney. “So depending on the situation, we can react and we can react fast.”

Russia’s central bank this month extended its interest-rate pause to 17 months and signaled for the first time that it’s prepared to tighten monetary policy if ruble weakness adds to inflation risks. The ruble has lost 8.1 percent this year against the dollar, according to data compiled by Bloomberg, the worst performer among 24 emerging-market currencies except for Argentina’s peso.

“The situation with the ruble does not affect our plans to introduce inflation targeting this year,” Yudaeva said. “We said from the very beginning that we will think about new roles which will allow us to use foreign currency interventions for the purpose of financial stability. But still we think inflation targeting is the proper regime for the Russian central bank. We will be moving that way.”

Central bank Chairman Elvira Nabiullina has signaled readiness to follow countries including India, Turkey and South Africa in tightening monetary policy as a rout in emerging-market currencies increased inflation risks. The Russian central bank still predicts consumer-price growth will slow to its 5 percent target by the end of this year.

President Vladimir Putin is urging Bank Rossii to work on reducing rates on corporate loans to ignite economic growth. The economy of the world’s biggest energy exporter advanced 1.3 percent in 2013, decelerating for a fourth year as consumer spending failed to make up for declining investment and a drop in global demand for Russia’s commodity exports.

To contact the reporter on this story: Michael Heath in Sydney at mheath1@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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