"This happy outcome was a result of serious efforts by the Finance Ministry to contain budget expenditure and by the Central Bank to restrain excessive monetary growth. Inflation control became the most important priority for the government because, apart from aiding economic recovery, a low inflation rate allows the Central Bank to keep its nominal rates relatively low. With decelerating inflation, average deposit rates at commercial banks became positive in real terms from December 2009 until June. Affordable borrowing rates for mortgages, consumer goods and small businesses are an important part of the government’s strategy for economic growth. Most important, it meant that interest rates became positive in real terms for savers as well as for borrowers. Negative real interest rates, a frequent occurrence in the last decade, are a monetary distortion. The problem with negative real borrowing costs is that they distort capital formation over time and destroy the incentives for saving. ... Underlying this inflation resurgence is a burst of liquidity. Lulled by buoyant oil prices, budget amendments were adopted in July to raise 2010 expenditures to 10.2 trillion rubles. At the same time, there was a renewal of the Central Bank’s old, bad practice of printing money via reserve accumulation. From Jan. 1 to the end of August, international reserves grew by $37 billion, implying that an equivalent amount of rubles were printed. Even if temporarily sterilized in part, excess liquidity can clearly increase inflationary pressures later on." Read more. "Inflation Could Trip New Exchange-rate Crisis" Martin Gilman St. Petersburg Times, September 10, 2010.