World Bank Issues Warning on Inflation

The government and Central Bank must tackle accelerating inflation to sustain economic growth, which probably slowed to an annual 8.7 percent in the first quarter, the World Bank said in a report Monday.
Inflation quickened to 14.3 percent in April, the fastest pace in five years, and the Economic Development Ministry expects consumer-price growth of 9 percent to 10.5 percent this year, compared with 11.9 percent in 2007.
“Reducing inflation in Russia is a necessary condition for sustained high rates of growth,” the bank said. “International evidence overwhelmingly suggests that the objective of high, sustained growth cannot be achieved with high inflation, which hurts both saving and investment.”
Central Bank increases in interest rates and mandatory reserve requirements of banks since the start of the year were “moves in the right direction,” the World Bank said. “More tightening will be required.”