The head of Russia's central bank rebuffed a call on Thursday by president Vladimir Putin to ease monetary policy, saying interest rates should only fall as progress is made in bringing down inflation.
Putin, who returned to the Kremlin last May for a third presidential term and has been Russia's most powerful politician since the turn of the millennium, has long been used to getting his way.
But, despite adding his voice to a crescendo of calls from top officials and business leaders for interest rate cuts to boost a flagging economy, Putin drew a calm rebuttal from Sergei Ignatyev, the veteran chairman of the Bank of Russia.
Speaking at a Kremlin meeting broadcast live on state TV, Ignatyev said interest rates should follow inflation down from over 6% to expected levels of 4% or below in the next few years.
Interest rates will fall, perhaps not straight away, perhaps with a delay. But, as inflation falls, interest rates will fall, the 65-year-old central banker said.
Ignatyev, who retires in June after 11 years at the helm, said the government would have to uphold fiscal discipline to open the way for future interest rate cuts.
Putin has yet to select Ignatyev's successor he is expected to do so in March - and the jury is out on whether he will pick a hawkish guardian of inflation-fighting or a more dovish advocate of monetary stimulus for Russia's $1.9 trillion economy.
This political pressure is reaching its peak right now, with the most powerful person in the country, said Ivan Tchakarov, chief Russia economist at Renaissance Capital in Moscow.
The central bank's last interest rate move, in Sept 2012, was upward. Inflation, which ended the year at 6.6% is above target the range tops at 6% and may rise to 7% in January, economists say. Rate setters are concerned that inflation will spike further. They argue that economic growth in Russia, at around 3.5% last year, is running close to a potential rate that has roughly halved since the economic slump of 2009.
Prime Minister Dmitry Medvedev wants to boost growth to 5%. The economic strategy he presented to the Kremlin meeting is short on credible structural reforms to achieve that goal, however, and has drawn unfavourable comparisons with the five-year plans of the Soviet era.
Opening the meeting, Putin expressed concern that rising interest rates were cutting the flow of credit to the economy, whose growth slowed to