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Inflation rate in Russia over the first three months of 2004 reached 3.5 percent
Inflation rate in Russia over the first three months of 2004 reached 3.5 percent, versus 5.2 percent in the same period last year, Central Bank chairman Sergei Ignatyev said at a meeting with President Vladimir Putin on Friday. "We have good chances to meet our inflation target of 8 to 10 percent,» Ignatyev emphasized. He said Russia's gold and hard currency reserves had somewhat decreased in April, amounting to 83.8 billion dollars. However, the trend towards their growth continues, Ignatyev noted adding that "the macroeconomic situation, on the whole, remains normal." Russia's gold and hard currency reserves reached 77 billion dollars as of January 1. On February 20, they totalled 89 billion dollars, while by April they decreased to 83.8 billion dollars. Ignatyev said the decrease occurred because of the Finance Ministry's foreign debt payments in March-April worth over four billion dollars. Another reason behind the decrease was that the movement of short-term capital had become more dynamic and changeable in the past 18 months. "The periods posting short-term inflows of capital through the country's banking system alternate with the periods of outflows," the chairman said. It is a natural process, there is nothing unexpected or harmful in it; it is a result of the activities by the Central Bank and the government to liberalize currency regulation, according to Ignatyev. The real effective rouble rate grew 4.7 percent in the first three months of this year. "We predict its aggregate strengthening by 3 to 5 percent this year," he noted. "The Central Bank closely watches the situation. At present, we don't see any negative signs," according to Ignatyev. The chairman underlined that the Bank was ready to make certain adjustments to the credit and monetary policy, in order to meet its commitments. Ignatyev promised to keep decreasing the mandatory level of bank reserves. He explained that the 7-percent rate remains for the rouble-denominated deposits of individuals, while the interest rate for the others decreased from 10 to 9 percent. It will provide for releasing some 20 billion roubles for commercial banks. These actions are necessary in the process of liberalizing currency regulations, Ignatyev said. The competition between Russian and foreign banks on the Russian loan market is becoming increasingly tougher, he said. Since the norms of mandatory reserves in Europe are considerably lower, Russian banks find themselves at a disadvantage. "We intend to continue decreasing the norms for mandatory reserves," Ignatyev said emphasizing that it should be done with caution, because this money turns into liquid assets, with banks beginning to loan it to Russian companies. Putin asked about the growth of debt and liability of Russian legal entities to foreign banks. Ignatyev said "it is an expected an normal process which can be regulated."
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