Nabiullina called for raising the requirements for the down payment on a mortgage

The head of the Central Bank answered MK’s question

Too high rates of inflation growth, as well as consumer and mortgage lending in Russia, left the Central Bank no choice. This is the essence of what Elvira Nabiullina said at the briefing on October 27. Having raised the key rate by 200 basis points on Friday, from 13% to 15% per annum, the regulator tightened monetary policy more dramatically than expected. It is still difficult to judge the long-term consequences, but the ruble reacted instantly.

The market exchange rate of the Russian currency, the weakening of which is a powerful pro-inflationary factor, fell below 93 per dollar and 98 per euro. Meanwhile, back in early October, the dollar was quoted above 100 rubles. Then, on October 24, for the first time in four months it dropped below 94 – against the backdrop of the authorities’ decision to compulsorily sell foreign currency earnings by exporters. However, the Central Bank does not consider this measure a panacea.

“Restrictive measures can only work for a short period of time, somewhat accelerating the influence of fundamental factors,” Elvira Nabiullina said at the final press conference. – In the future, the exchange rate will be affected by tightening monetary policy, which cools aggregate demand. Including demand for imports in ruble terms. The exchange rate will also be affected by changes in prices and physical volumes of exports.”

The number one topic of the press conference of the head of the Central Bank was predictably inflation. Nabiullina’s key message: current inflation pressure (in October, annual inflation increased to 6.6% after 6.0% in September) has increased significantly and is higher than the Bank of Russia’s expectations. Domestic demand for goods and services is steadily growing, but production is not keeping pace with this process; it is unrealistic to quickly expand it in the current circumstances. It is easier for enterprises to transfer increased costs into prices, including those associated with the weakening of the ruble and the shortage of available labor resources (two-thirds of companies in the Central Bank survey faced this).

In general, the situation leaves the state and the population no choice: if we want to achieve the inflation target of 4% in 2024, we will have to get used to ultra-tight monetary conditions in the economy for a long time.

According to Nabiullina, lending growth rates remain high. The most problematic area is mortgages, including due to the too large volume of loans issued under government preferential lending programs. With elevated inflation expectations and unchanged levels of nominal rates, such programs are increasingly attracting borrowers.

In this regard, at the press conference a question was asked from an MK correspondent: “If the Bank of Russia continues to give recommendations to the government on preferential mortgages, then what will we talk about – raising the rate, increasing the down payment, tightening requirements for borrowers or something else?

“In September, our mortgages grew by 4.2% in just one month,” noted Elvira Nabiullina. – These rates can no longer be called simply signs of overheating of the mortgage market. Here we see risks, I have spoken about them many times.

Evidence that they are not decreasing is the persistent gap in housing prices in the primary and secondary markets. That’s why we started taking measures, including the introduction of macroprudential bonuses from October 1, they are quite serious.”

According to the head of the Central Bank, these measures should affect the volume of lending, especially risky lending. “The increase in the key rate plays a role in the mortgage market segment. There it slows down, but the rate of delivery remains the same. It is necessary to raise the down payment requirement for preferential mortgages, but this is the government’s decision.”