bonds. the stabilization fund ’ s role in sterilizing excess liquidity was particularly prominent between 2004 and 2005, when the stabilization fund resources increase was about 60 % of the total increase of russia ’ s international reserves. in 2006, and especially in 2007, international reserves have increasingly boosted by the inflow of private capital. even though inflation in russia remains high, it is gradually going down. in 2004, consumer price growth ( december - to - december ) was 11. 7 % ; in 2005, the figure was 10. 9 %, and in 2006, 9. 0 %. in 2007, inflation is expected to be reduced to 6. 5 - 8. 0 %. from april 2006 till april 2007 the inflation rate was 7. 6 %. russia applies a managed floating exchange rate regime. the central bank aims to attain two goals in implementing its monetary policy. the first principal goal is to gradually reduce inflation. the second task is to prevent a sharp real effective appreciation of the ruble, so as not to harm the conditions for economic growth. i would like to stress that we understand that the central bank can only exert a temporary influence on the real effective exchange rate of the national currency. for example, if there is a strong balance of payments and the central bank doesn ’ t allow nominal appreciation of the ruble, this will inevitably lead to growth in foreign exchange reserves, a rise in money supply, and eventually, after a certain period, to higher inflation. this means a real strengthening of the national currency. besides, we acknowledge that the set goals are contradictory in principle. given that the world prices for exported goods are very high and there is a strong inflow of capital, to attain the two goals simultaneously may be impossible. the central bank of russia gradually enhances the focus on achieving its inflation goal and reduces its responsibility for preventing a sharp rise in the real effective ruble exchange rate. we think that with the development of market mechanisms, increased flexibility of the economy, greater production factors mobility, and the development of the financial system, the degree of negative impact on economic growth caused by ruble real appreciation should decrease. in the future we intend to stop taking on any obligations in restricting appreciation of the real effective ruble rate, and to move on to inflation targeting, and free floating regime. it is not easy to achieve considering our strong dependency on world commodity prices. in order to reduce inflation, the central bank allowed the increase of the nominal effective ruble rate :

is relevant for central banks. mostly ignored ( or left as a “ by - product ” ), today financial stability is a goal as important as price stability. furthermore, in my view, how to handle the links and trade - offs between these two goals is what would make us succeed as central bankers. financial stability as an explicit goal has been for years very common throughout the emerging world. it actually, became a must given our history of macroeconomic instability. during past decades, crises in our countries have helped clarify the connection between monetary and financial stability. on the other hand, in developed countries, where the real side is usually highly affected by disruptions in capital markets, financial stability was traditionally viewed more as an instrument rather than a goal per se. but now, when capital markets are at stake, monetary and financial authorities in industrial countries have taken every needed step to grant stability, even in a context where traditional central bank instruments proved to be unable to deliver. we still confront the challenging task of defining and measuring financial stability. there is no unique or generally accepted definition. as well, when it comes to making financial stability an operational factor, disagreement among relevant actors arise, something that is somehow different with price stability goals. on top of that, there is also a lack of available instruments to achieve financial stability, whether it is a developed or emerging market economy. those missing tools may have its part on explaining the under pricing of risk during recent times, leading to a short - sighted vision on potential longer - term consequences of a reversion on the business cycle. in this regard, one of the key tools is to have a proper financial regulation and to use the information provided by monetary aggregates. this should also be consistent and well - integrated with the monetary policy framework. this means, for instance, developing a macro - prudential framework that could help to link both approaches. the crisis highlights the importance of the risk management approach in the design of precautionary strategies for the conduct of an effective monetary policy in small open economies. it is necessary to consider not only the most likely future path of economic development, but also the distribution of feasible outcomes around that path. an informed judgment of the costs and benefits of these possible outcomes under alternative choices should be made. as usual, and regardless of undeniable costs, crises are a breeding ground for creativity, but also for the inevitable revision of previously accepted principles. in times of turmoil, theoretical consensus on “ what to do ” and