On the Choice of Goals and Instruments of Monetary policy

Abstract

There is the inherent contradiction in the present-time monetary policy -between the containment of the increase in the exchange rate of the rouble and too high Central Bank rate. This contradiction is caused by limiting the legislatively established goals of Bank of Russia to a target of inflation decrease. To provide macroeconomic stability under conditions of both high and low oil price conjuncture Bank of Russia should use diverse monetary and credit policy instruments including refinancing banking credits to enterprises and purchase of Russian government securities. Since the monetization of the Russian economy is low the threat of inflation strengthening as a result of increase of domestic credit is grossly overestimated. The evidence of this fact is the dynamics of monetary aggregates in constant prices and in terms of dollars as well as in proportion to GDP.