Kudrin Says Inflation in Bank Hands

Finance Minister Alexei Kudrin said Wednesday that he saw the Central Bank's deposits, bank reserve requirements and market operations, but not the ruble as key anti-inflation levers in 2008.

The country missed its 2007 inflation target by a wide margin, reversing a lower inflation trend seen in previous years. With annual inflation running at over 13 percent, Russia also looks set to miss the 2008 official target of 8.5 percent.

The government has introduced a package of anti-inflation measures, which include price controls, anti-monopoly regulation and export duties, but Kudrin said the package would have little impact on the price growth.

"I believe the fate of inflation is now in the hands of the Central Bank," Kudrin told reporters in the State Duma.

The Central Bank raised all of its interest rates and mandatory reserve requirements last month, seeking to curb inflationary pressures. Deposit rates provide a floor for the money market rates and are currently set at 3 percent.

The Central Bank has said the ruble exchange rate is no longer an effective tool for lowering inflation.

Kudrin said the new Budget Code provided a legislative framework for a better control over budget spending, another factor behind growing consumer prices.

n A possible cap on the retail markup for some foods is "impractical" and could lead to shortages, Kudrin said, Interfax reported.

He called the proposal "impractical" and "unacceptable," Interfax said.

n The government may hire private companies to manage the National Welfare Fund, Kudrin said, Interfax reported.

Current law allows only the Central Bank to manage the country's gold and foreign currency reserves, Kudrin said.

n Budget revenue would fall by as much as 2 percent of the country's gross domesitc prouduct -- the equivalent of current annual defense spending -- if the value-added tax rate is cut from an average of 18 percent to 12 percent, Kudrin said, Interfax reported.