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18 Aug, 2008 03:02

CBR close to getting inflation under grips

Russia's Central Bank claims it's halted the country's runaway inflation. Deputy Chairman Konstantin Korischenko said the 2008 target, upped three times already this year to almost 12%, could now come down.

Speaking to Business today, Korischenko began by revealing the Central Bank's plan to cut more dollars from its reserves, in favour of less “volatile” currencies.

“The dollar is still a very important world currency, but it has become very very volatile, and we're really trying to put into our portfolio those currencies which are quite liquid.”

Correspondent Daniel Bushell asked about the spreads between borrowing and saving rates asking ‘If I was saving my money in a Russian bank I'd get maybe 3% interest, whereas if I want to borrow I have to pay 15%. Why is the spread so large and can the Central Bank do anything to help that?’ Korischenko replied

“The only way to resolve this issue is to first press inflation down, putting it in line with that level we see abroad. And the second to make our exchange rate policy more flexible.”

Bushell continued ‘Some business leaders said last week inflation could reach 20% this year, could it be higher than the 12% you've predicted officially?’ to which Korischenko concluded

“Probably even a little bit less. We have inflation really close to zero during the last several weeks, the result of a previous squeeze in money supply that happened back in the first quarter of this year. We can expect that this trend can continue through the next several months.”