Nabiullina calls disinflationary risks in Russia insignificant – Kommersant

The head of the Central Bank of Russia, Elvira Nabiullina, believes that disinflationary risks for the Russian economy are currently insignificant. She called the possible tightening of Western sanctions against the Russian Federation a more serious risk for the economy.

“Pro-inflationary risks are a sharper pass-through of the ruble depreciation into prices and a long-term persistence of inflationary expectations at an elevated level. The deterioration of external conditions remains a significant risk, including the possible tightening of the sanctions regime. Disinflationary risks are insignificant,”— reported Ms. Nabiullina at a press conference following a meeting of the Board of Directors of the Bank of Russia.

According to the head of the Central Bank, the reason for the weakening of the ruble is the dynamics of exports and imports, and not a factor in the movement of capital into foreign accounts.

“Usually weakening the exchange rate leads to a reduction in demand for imports, but so far this has not happened. There are two reasons for this: first, contract lags. The imports that come into the country now are bought at the exchange rate on the day the contract is concluded. The second and main reason is that as domestic demand expands, so does the demand for imports. This is another confirmation that domestic demand has grown significantly,” she explained.

On July 21, the Board of Directors of the Bank of Russia following the meeting raised key rate up to 8.5% per annum. Previously, it was at the level of 7.5%, the indicator has not changed since September 2022.

Today’s rate hike turned out to be more serious than the market expected (it was assumed that the rate could be raised only up to 8%). According to Ms. Nabiullina, fluctuations in the exchange rate of the ruble became one of the factors in deciding to raise the key rate, but the Central Bank was guided not only by this, but also by other circumstances.

Alexander Kislov