Скриншот видеозаписи Банка России
The Central Bank of Russia has recently stopped cutting its key interest rate. In statements, the regulator referred to reduced production capacity in certain sectors, which could be linked to Ukrainian strikes on Russian oil refineries. Today, speaking at a meeting of State Duma committees, Bank of Russia Governor Elvira Nabiullina directly cited the consequences of the attacks as a reason for its decisions.
“Attacks on our oil refineries, other industrial enterprises, data centres and logistics hubs have limited production capacity. We believe this is temporary, as both businesses and the government are making enormous efforts to restore the damaged facilities,” RBC quoted her as saying.
Until the recovery is complete, demand should grow at a moderate pace. However, there is no talk of a decline in GDP. Against this backdrop, excessive demand growth could fuel inflation.
“This cannot be allowed to happen. As production capacity is restored, alongside steady growth in labour productivity — which is important — this risk will diminish, creating room for further monetary policy easing and key rate cuts. But not before that,” she explained.
Nabiullina also cited rising inflation expectations and a higher-than-expected contribution from government spending to demand this year and over the next two years as reasons for the temporary pause in key rate cuts.
“Taken together, these factors send an unequivocal signal that we must not rush to cut the key rate. Doing so would produce the opposite results: higher interest rates across the economy, rising prices and new difficulties for our businesses. They already have enough difficulties as it is. And having to start all over again is not just something we would like to avoid — it would be an unforgivable mistake,” she concluded.