06 March. The Central Bank's policy not only slowed the price increase, but also strengthened macroeconomic mechanisms.
One of the most discussed issues at the moment is the policy of the Central Bank. On the one hand, there are notable achievements, even exceeding expectations, - inflation according to official data slowed to a record 2.5%. On the other hand, according to business and some experts, the price of such a record is too high: the real value of money is so high that it does not allow the Russian economy to get out of stagnation. Who is right?
In our opinion, both sides are right in their own way, but they are not right at the same time. After all, each side narrows the discussion, concentrating only on two indicators. Naturally, inflation and a key interest rate are very important for the country's economy, but the analysis of only these indicators does not describe the whole picture.
In general, the task of monetary policy is to maintain stable prices and full use of production capacities of the economy (labor and fixed assets). However, in developed countries, central banks need to slightly adjust the refinancing rate (by 0.5% or even 0.4%), and in Russia at the end of 2014 it was necessary to raise the key rate from 10.5 to 17%, the dollar rate soared at that time on 80%. Of course, developed countries can gently adapt to internal and external shocks, largely due to the diversification of the economy and the developed financial system.
An important role is also played by the high quality of macroeconomic mechanisms inherent in these countries.
Influence on macroeconomics
Let's analyze the prices of manufacturers of the industry. In 2017, they increased by 8.4%, which is 3 times higher than the growth of consumer prices. This means that the growth of costs has only slightly transformed into an increase in consumer prices. Of course, the consumer price index (CPI) is determined not only by producer prices - dynamics of the exchange rate play no less a role in its formation.
According to the Economic Expert Group, this dependence has also weakened. If earlier the appreciation of the dollar by 10% during the year resulted in an increase in the consumer price index by 1.2-1.5%, then after the transition to the investment targeting regime, the same appreciation of the dollar began to cause CPI growth only by 0.5-0 , 7%.
The exchange rate itself, as before, significantly reacts to changes in oil prices. However, the reaction here became less pronounced. If earlier the fall in oil prices caused a 10% increase in the dollar's price by 4%, now, according to the Economic Expert Group, the strength of communication has been halved - with the same fall in oil prices, the dollar's rate rises by 2%.
Thus, the policy of the CBR not only drastically slowed the price increase, but also strengthened macroeconomic mechanisms. And this means that in the future maintaining inflation at the target level does not require radical measures.
Factors of trust
At the expense of what the reaction of the economy to shocks? The main part of the adaptation is delegated by the Central Bank. If market participants believe that the Central Bank will quickly eliminate the consequences of a shock and restore economic stability, then they do not need to react instantly themselves. And then the workers do not demand an immediate increase in wages, manufacturers are slow to raise prices for their products, etc.
And here we come to an important point - the factor of trust to the Central Bank and its independence. It is these conditions that ultimately determine the effectiveness of monetary policy, without which no measures will yield results. Thus, the Central Bank has to solve a double task: on the one hand, quantitative (to reduce inflation) and, on the other hand, qualitative (to win the trust of market participants from companies and banks to the government and the population). It is not surprising that this stage requires additional control from the regulator, which may seem superfluous. However, if macroeconomic indicators are strengthened after these measures, the losses in the future pay off with interest, because the following shocks no longer require such harsh reactions. In a broad sense, the current policy of the Central Bank should be seen as an investment in the future quality of macroeconomics.
At present, one can see that the reaction of the Russian economy to shocks has significantly weakened. Can we say that the confidence in the Central Bank has been strengthened? Of course, it is difficult to measure confidence, but it is clear that it is determined primarily by the result - whether the regulator can quickly reach the declared goals and support them. The 5-fold reduction in inflation rates over the past 2 years undoubtedly demonstrates the Central Bank's ability to ensure price stability.
Another important point is the independence of the Central Bank, that is, the ability to act without succumbing to pressure from outside. The independent Central Bank pursues a policy that it considers to be correct, without regard for general discontent, and achieves its goals. Therefore, criticism of the Bank of Russia is the best proof of independence and the guarantee of a future successful monetary policy.
