This is partially due to temporary factors, but the fall in measures of underlying inflation also appears to be connected to the weakening of activity. And developments in the exchange rate may have a negative impact on the path of inflation. Continued policy support is therefore necessary to achieve our inflation aim. But we should also consider how best to provide that support.
Some advisors have prescribed the “shock therapy” to Russia and Eastern European countries, but later on this was described as “shock with no therapy”. We should be cautious to offer the same prescription again, so as not to have credibility jeopardized.