Price increases are, of course, conditioned by many other factors, such as the economic situation, the fiscal stance, wage formation and so on. But inflation is a monetary phenomenon and in the longer run the Riksbank, by controlling the supply of money in a wide sense, can also control its value in terms of inflation. The perception that the primary task of a central bank should be to maintain price stability can be said to have won general acceptance. In that low, stable inflation helps to improve the functioning of markets, it seems reasonable that, indirectly, monetary policy also promotes economic growth and employment. In their economic decisions, households and firms have one less source of uncertainty - inflation - to worry about. The inability of monetary policy to affect long-term employment and the fact that it should focus on maintaining price stability does not mean that its capacity to condition production and employment in the short run can not sometimes be used for stabilising activity. Monetary policy can contribute to an economic recovery in so far as this is feasible without jeopardising price stability.
oil prices in the risk scenario stand at $ a barrel in 2018–2019, and fall to this level by the end of 2017. We have updated some internal parameters. They will be published today in the Monetary Policy Report. We have kept those predictions in the scenario with growing oil prices, at $ there have also been some minor revisions but general trends remain unchanged. In essence our estimates have not changed since last December. RBC Media Holding’s QUESTION: Two questions, please. First. You have cited many factors which favour the rate cut, but the significance of constraining factors remains relatively unclear. Do they include uncertain fiscal policy and reshuffles in the Ministry of Economic Development? Could you please repeat what prevents you from reducing the rate more rapidly and why the rate of reduction is 0.25 pp – is this a new norm? And question two. Economists say that the key rate is losing significance in terms of the economy, i.e. businesses are watching it less closely. Do you see any considerable difference between 9.75% and 9.5%? How important is the key rate at this time? ELVIRA NABIULLINA: Indeed, we took into account many positive factors as we made the decision to cut the rate, however inflation risks still persist. We consider them more likely to be medium-term than shortterm risks. Monetary policy takes effect with a lag of six to nine months, therefore when in making a decision we have to bear in mind its effects not only this year, but also in 2018.