SERGEY SINELNIKOV-MURYLEV: “STABILIZING INFLATION IN RUSSIA ALLOWS FOR A NEW PHASE OF MONETARY POLICY"
Stabilizing inflation in the Russian Federation allows Russian authorities to switch to a new phase of monetary policy (MP). Sergey Sinelnikov-Murylev, Rector of the Russian Foreign Trade Academy under the Ministry of Economic Development of the Russian Federation, Academic Director of the Gaidar Institute, shared this opinion with TASS.
“A number of factors contribute now to stabilize inflation, indicating an opportunity to switch to a new phase of monetary policy. As economy adjusts to sanctions, the development of business investment activity will facilitate the economy's rapid switch to a new development pathway," said Sergey Sinelnikov-Murylev.
He noted that low inflation indicators observed in recent weeks and deflation of the last reporting week are not only due to a seasonal factor, but also to a number of macroeconomic effects. The first, according to the expert, is a decline in consumer demand after a surge in March-April. "As of today, the effect of rising prices due to feverish demand can be considered exhausted," explained the Rector of VAVT.
Moreover, strong ruble provided significant support for curbing of inflation, which, according to Sergey Sinelnikov-Murylev, "largely outweighs the imports pressure on prices." At the same time, reducing norms for the sale of foreign currency export earnings fr om 80% to 50% and increasing the permissible term for the sale of currency is likely to decelerate ruble strengthening, but will not change the "direction of the exchange rate dynamics" due to high energy prices and shrinking imports, the expert added.
"A contributing factor behind strong ruble is the key rate remaining at a high level. The current exchange rate exerts downward pressure on consumer prices via imports. However, there is a risk of reduced competitiveness for domestic producers not only in external, but also in the domestic market, primarily in industries wh ere imports from neutral countries play a significant role," summarized Sergey Sinelnikov-Murylev.
He also focused on possible solutions of disrupted production chains and higher production costs. An alternative to discrete measures to support business in these conditions is to increase the availability of credit by lowering the key rate, the expert explained. "In this regard, we can recall the experience of developed countries during the pandemic. They undertook significant measures to support demand, including monetary measures. Such actions allowed developed economies to recover relatively quickly. Moreover, the inevitable subsequent spike in inflation was recognized by these countries as the least of the woes," said Sinelnikov-Murylev.
He noted that low inflation indicators observed in recent weeks and deflation of the last reporting week are not only due to a seasonal factor, but also to a number of macroeconomic effects. The first, according to the expert, is a decline in consumer demand after a surge in March-April. "As of today, the effect of rising prices due to feverish demand can be considered exhausted," explained the Rector of VAVT.
Moreover, strong ruble provided significant support for curbing of inflation, which, according to Sergey Sinelnikov-Murylev, "largely outweighs the imports pressure on prices." At the same time, reducing norms for the sale of foreign currency export earnings fr om 80% to 50% and increasing the permissible term for the sale of currency is likely to decelerate ruble strengthening, but will not change the "direction of the exchange rate dynamics" due to high energy prices and shrinking imports, the expert added.
"A contributing factor behind strong ruble is the key rate remaining at a high level. The current exchange rate exerts downward pressure on consumer prices via imports. However, there is a risk of reduced competitiveness for domestic producers not only in external, but also in the domestic market, primarily in industries wh ere imports from neutral countries play a significant role," summarized Sergey Sinelnikov-Murylev.
He also focused on possible solutions of disrupted production chains and higher production costs. An alternative to discrete measures to support business in these conditions is to increase the availability of credit by lowering the key rate, the expert explained. "In this regard, we can recall the experience of developed countries during the pandemic. They undertook significant measures to support demand, including monetary measures. Such actions allowed developed economies to recover relatively quickly. Moreover, the inevitable subsequent spike in inflation was recognized by these countries as the least of the woes," said Sinelnikov-Murylev.