Page 37 - bne IntelliNews Russia OUTLOOK 2025

4.0 Inflation and Monetary Policy
The head of Russia’s Central Bank, Elvira Nabiullina, continues to face down her critics as she hikes interest rates to crushingly high levels in an effort to bring persistently high inflation down.
In December, the CBR fought back against business leaders who wanted to curb the regulator’s independence. In the week of November 25, Nabiullina defended record-high interest rates before a hostile audience in the Russian parliament.
Nabiullina told deputies November 18 that the current situation (with interest rates hiked to 21% last month) is different from previous crises when the CBR raised rates sharply but was then able to lower them again quickly.
On those occasions, rates went up in response to external shocks and to “prevent inflation from escalating, cope with a run on the banks and maintain financial stability.” As soon as those aims were achieved, the CBR was able to cut the rates in order to promote economic growth.
But now, according to Nabiullina, things are different. The economy is stretched, and a labour shortage means productivity cannot be boosted. Without a strict monetary policy, she said, the economy would be vulnerable to stagflation (low growth and high inflation).
The CBR is betting that, by making money more expensive, the lending market will cool, savings will grow, and consumption will fall. All of this helps to combat inflation. At the same time, the CBR is trying to limit the
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