Azernews.Az

By Bloomberg

The Bank of Russia isn’t backtracking on its priority of fighting inflation after two interest-rate cuts this year, a central banker said.

“The reduction of the key rate doesn’t mean the task of lowering inflation in the medium term is abandoned,” Igor Dmitriev, head of the central bank’s monetary policy department, said at a conference in Moscow on Wednesday. “Long-term monetary policy priorities aren’t changing. What’s changing are the conditions in which we are carrying them out.”

The surprise policy turn to easing in January has raised concerns that the central bank is caving in to political pressure and compromising on its inflation goal after increasing the benchmark six times in 2014, including an emergency move to 17 percent last December. Inflation accelerated in March to the fastest since 2002, complicating the picture for policy makers as the economy enters its first recession in six years.

The central bank’s rate decisions are guided by its medium- term outlook on price growth, Dmitriev said, adding that policy makers see a stabilization of inflation expectations. Gross domestic product will probably contract for the next two years, he said.

“There’s now a more pronounced effect of cyclical factors, and the policy reaction to these events is largely justified,” Dmitriev said.

The central bank will continue to reduce its key rate, which is now at 14 percent, if inflation risks continue to abate, Governor Elvira Nabiullina said Tuesday. Price growth is set to slow to about 9 percent next March, she said.

Inflation quickened to 16.9 percent from a year earlier last month, compared with 16.7 percent in February.