The first deputy chairman of VTB proposed extending the deadline for achieving the inflation target for the predictability of the Central Bank

First Deputy Chairman of VTB Dmitry Pyanov spoke in favor of a more predictable monetary policy of the Central Bank. To do this, he proposes to extend the period for achieving the inflation target, use supply factors when making decisions on the key rate, and improve the composition of the basket used to calculate the consumer price index. Mr. Pyanov made proposals in an article for RBC.

What Dmitry Pyanov offers:

• Introduce a comfortable, guaranteed execution, publicly broadcast inflation target date. For example, in Armenia and some other friendly countries, the period for achieving the inflation target is three years.
• When making a decision on the key rate, use not only demand factors, but also supply factors. They are included in the information base, but, according to the first deputy chairman of VTB, the former prevail over the latter.
• Include goods or services that stabilize inflation in the basket used to calculate the consumer price index. For example, imputed housing rent.

In a study by the International Monetary Fund for 2010–2018, the Bank of Russia was called one of the most unpredictable central banks in the world, Mr. Pyanov recalled. According to VTB calculations, Russia ranks second after Turkey in terms of unpredictable monetary policy in 2021–2023. As the expert notes, the discrepancy between analysts’ forecasts and the actual decision on the rate leads to higher prices for banking products in the future.

The First Deputy Chairman of VTB believes that the decisions of the Central Bank, which are difficult to predict by market participants, are not the result of unprofessionalism. The problem is “very volatile and unpredictable inflation” in Russia.

The Central Bank forecasts inflation to reach 4–4.5% by the end of 2024, but VTB believes that this result is “mathematically achievable” only if inflation falls to 2% in the second, third and fourth quarters of 2024. “To achieve it, undoubtedly, the regulator must have secret knowledge of what forces are capable of intensifying its attack on inflation,” Mr. Pyanov wrote.

How the Central Bank assesses the effectiveness of raising the key rate – in the Kommersant material “Not so much expensive, but long”.

Leonid Uvarchev