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Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 22 July 2022

22 July 2022

Good afternoon! Today, we have made the decision to decrease the key rate by 150 basis points to 8% per annum.

Our decision is based on a comprehensive assessment of current conditions and the updated macroeconomic forecast. In May—July, inflation has been slowing down progressively. This was owing to a stronger ruble and a downward adjustment of prices for the products that had earlier become more expensive. In recent weeks, this deceleration has become larger-scale, which suggests that consumer demand has also contributed to the slowdown of inflation. We have lowered our inflation forecast for this year to 12.0–15.0%. The forecast for the next year remains at the level of 5.0–7.0%. Our monetary policy takes into account the need for a structural transformation of the economy and is aiming to return inflation to the 4% target in 2024.

I would now dwell on the factors behind our decision.

Firstly, price pressure continues to weaken.

Prices have been declining almost continuously for nine weeks by now. We still believe that the main reason for the deceleration of inflation is the adjustment of prices after their surge in March. Then, the ruble drastically weakened, and companies’ costs rose considerably. Soaring demand made it possible for them to pass through higher costs to prices. By the moment, the situation has changed. The ruble has strengthened significantly. Manufacturers and trade companies can see that some prices were over-increased. However, prices cannot adjust overnight — this process takes time. Businesses are trying to conceive what level of prices will be acceptable for consumers and cover their rising costs. 

The substantial strengthening of the ruble has influenced the perception of prices and households’ attitude towards purchases. This is evident from changes in inflation expectations. In July, they have edged down to 10.8%, which is the lowest level since March 2021. People believe that current prices for many goods are unreasonably high and are waiting for their reduction. Companies’ short-term price expectations continue to decline. They have returned to the level of spring 2021.

I will now speak of how we assess the impact of consumer demand on inflation. In recent months, this effect has been disinflationary and, coupled with a stronger ruble, has ensured a faster slowdown of inflation. Currently, the propensity to save is high, although the situation might change. A high saving ratio is partially associated with the fact that people were unable to buy what they wanted due to the exit of foreign companies and thus decided to make precautionary savings.

A key assumption of our forecast is further trends of consumer demand.

On the one hand, the propensity to save can remain high. Amid increased uncertainty, households prefer to save more in order to have a safety cushion. This is prudent behaviour which will help people feel more confident in the case of part‑time employment schemes that might be introduced, forced leaves, or employment issues. Furthermore, the current decrease in prices and the strengthening of the ruble might be perceived as a signal to postpone major purchases now in order to buy these goods later at lower prices.

On the other hand, the scenario of the pandemic might repeat. Then, consumption first decreased notably and later on, after the lockdowns were cancelled, it recovered as quickly. This happened in both Russia and many other countries. Today’s savings, which are actually necessitated, are a compressed spring in the economy that might cause a surge in consumption under certain circumstances. If supply of products and services is limited, this might quickly speed up demand-driven inflation. 

There are already some emerging signs of a rise in consumer demand. I will specify three of them. First of all, as shown by surveys, in July, people have significantly improved their estimates of the suitability of the current period for major purchases.  Secondly, deposit rates are going down, due to which increasingly more people prefer to consume rather than save. Thirdly, the contraction of the retail loan portfolio observed in April—May reversed to its expansion. Further trends of consumer activity, that is, whether demand will be growing faster or more slowly and how this growth will correlate with the capacities to ramp up output, will largely determine our decisions on monetary policy.

Secondly, the data we are receiving suggest that the economic decline will be more extended over time and, possibly, will become less deep.

Speaking of the current year, the decline in GDP is forecast to be less significant, largely owing to a more moderate contraction of exports. This is predominantly because oil exports are partially redirected to new markets. As to imports, the dynamics are in line with our expectations. After a considerable reduction, imports started to bounce back. Primarily, we can see an increase in the imports of consumer products owing to the arrangement of new supply routes. Contrastingly, there are no clear signs of a recovery in the imports of intermediate and investment goods for now. Investment activity is constrained not only by difficulties with logistics for equipment supplies and significant fluctuations of the exchange rate affecting companies’ business plans, but also by economic uncertainty in general in the conditions of the structural transformation forcing businesses to be more cautious with regard to the prospects of the implementation of their long-term investment projects. 

The economic situation depends on how companies adjust to the changing conditions. This adjustment is very uneven across regions, industries and even individual companies within the same sector.

Overall, it is possible to note that many companies have managed to avoid a fast exhaustion of their stocks that could have caused interruptions of their production chains. To replenish the stocks, enterprises need to search new suppliers both in Russia and abroad. This will take time. According to our monitoring of businesses, the situation with stocks did not worsen over the past two months, but it has not improved either, which is still a factor of potential proinflationary risk. This topic is covered separately in a box in our recent report Regional Economy.

The transformation of the economy will be evident from changes in the labour market. We consider this to be a key indicator of the transformation process. I would give an example of enterprises experiencing problems with sales. One group includes companies totally focused on exports that used to work predominantly for European markets. The other group comprises manufacturers of certain components for auto groups, furniture factories, and household appliances assembly lines localised in Russia. Disruptions in production chains decreased the demand for their goods. Consequently, these companies will be forced to either change the range of their goods, or reduce their output. Concurrently, there are industries opening up more opportunities for import substitution. They will be creating new jobs. Today, the situation in the labour market is steady, and unemployment remains at its record lows. Businesses introduce part-time employment schemes. Nonetheless, as the structural transformation progresses, we will observe an increase in the transfer of manpower between companies and sectors.

Considering that the current economic processes are extended over time, we have revised our GDP forecast. According to our estimates, the economic decline will be less deep this year, namely 4.0–6.0%. Over the next year, GDP will edge down by 1.0–4.0%. To illustrate future dynamics, it would be more representative to make a quarter-on-quarter comparison. We expect GDP to be 1.0–2.5% higher in the fourth quarter of the next year than in the fourth quarter of this year.

Thirdly, monetary conditions are gradually easing. Credit and deposit rates continued to go down, just as yields on short- and medium-term federal government bonds. Yields on long-term bonds remain almost the same.

Credit activity has revived slightly, while still staying moderate. Mortgage lending is recovering at the fastest pace, but mostly owing to subsidised programmes. Unsecured consumer lending has started to expand as well. Corporate lending is rebounding, with foreign currency loans being replaced with ruble ones.

In the context of increased uncertainty, the propensity to save remains high. Despite a gradual decline in returns on deposits, households still hold their funds with banks. However, the proportion of time deposits is shrinking, whereas that of current accounts being the most liquid part of savings is growing. They might be quickly redirected to consumption if people’s sentiment changes.

I would like to say a few words about the balance of payments and the ruble exchange rate. In the new conditions of the sanctions and capital controls, as well as the absence of the fiscal rule, the exchange rate has become more volatile and is forming primarily under the influence of the current account. For monetary policy, this means that inflation, being impacted by the exchange rate, is also becoming more volatile and, accordingly, interest rates in the economy might become more volatile as well to support inflation close to the target. If the current account contracts already beginning from the third quarter, as assumed in our forecast, and the exchange rate adjusts to this change, its disinflationary influence will be smoothed out.

As regards the risks to the forecast, they are described in detail in the press release. Overall, it is possible to say that there are three main sources of uncertainty over the forecast horizon. These are external factors (risks created by the geopolitical situation and the global recession), fiscal policy, and possible changes in the propensity to save.

A further path of the key rate will depend on the future balance of risks for the path of returning inflation to the target in 2024 that we have predicted. According to the updated forecast and our today’s decision, the average key rate for the year will equal 10.5–10.8% per annum in 2022 (which conforms to the value until the end of the year in the range of 7.4–8.0%), 6.5–8.5% in 2023, and 6.0–7.0% in 2024. The rapidly changing situation characterised by a sequence of processes diversely influencing inflation and the economy requires more flexibility in our decisions and closer attention to high-frequency information.

Thank you for attention.

Q&A for the Media

QUESTION from TASS Agency:

The decision made by the Central Bank today was a surprise for everyone. Even the most daring analysts could not predict 150 basis points. What options were on the Board of Directors’ agenda? Is there still potential for a further reduction in the key rate this year?


We actually focused on three options — 8%, 8.5%, and 9%. There is still potential for a further key rate decrease over the medium-term horizon, which is reflected in our forecast of the average key rate. If you look at its path, it is going down gradually, but everything will depend on the information we receive. As I have already said, the situation is uncertain and there are many competing, alternating factors. Hence, we will be fine-tuning our monetary policy exactly in a way that will help us return inflation to 4% in 2024. Nonetheless, we will certainly respond to all incoming data, the trends that are forming.

QUESTION from Interfax:

Could you please say what parameters of the new fiscal rule are currently under discussion? Do you support an increase in the cut-off price roughly to 60 US dollars per barrel and the linkage of the new rules to output and exports?

And the second question I need to ask is as follows. What do you think about the authorities’ decision not to permit non-residents to sell Russian subsidiaries here? Do you support this? Do you agree that it is necessary to introduce control in foreign banks’ subsidiaries and who will control them in this case? May be this could be state-controlled banks, as some deputies and Central Bank representatives suggest, some government agencies?


We are currently discussing a possible mechanism of the fiscal rule with the Government and the Ministry of Finance. We support the resumption of the fiscal rule and it will certainly be modified. In our opinion, this is an essential mechanism ensuring the sustainability of economic parameters, fiscal parameters, budget expenditures, regardless of developments in the oil and gas sector. However, I would prefer not to comment on any specific parameters before they are officially announced by the Ministry of Finance, the Government.

As regards the operation of foreign banks’ subsidiaries and the permit to sell them, the decision is really to be approved by the government commission and we take part in it, but these decisions will always be made on a case-by-case basis. Of course, in this regard, it is necessary to consider the relation towards Russian companies’ subsidiaries abroad.

Speaking of external control, we hold that if Russian subsidiaries of foreign banks (and, our laws classify them as Russian banks) comply with all the established standards, work with their clients appropriately, and process payments, it is not needed to introduce external control. We believe that there are no grounds for this now.

QUESTION from Kommersant:

I have two questions. The first one is that 150 basis points is quite a lot. The signal is strong. Obviously, the Central Bank had the information that the market lacked. Could you say what exactly you know what the market does not? What was the main reason why you made such a sudden decision?

And another question, please. Do I have it right that the new forecast (although a particular figure is not given there) already assumes stagnation of the world economy at the very least?


As to the 150 basis points, we did not rely on any information that is not available to the market. We used the information that is known to the market. We also consider data on current inflation — it was essential for us that there is currently a decline in prices for a broad range of products already. Moreover, inflation expectations have decreased considerably and are now close to the last year’s level.


As regards last year and the following period, the figures are already coming close to those observed in late 2018—early 2019.


This is why we have adjusted our forecast. You could see that we always make our decisions not only based on the analysis of the actual data we receive, but also relying on the forecast. Our inflation forecast has changed significantly as well — we have decreased its range now.

I should say that after the release of recent data on inflation and inflation expectations, analysts and experts have also started to change their opinion towards a greater reduction in the key rate.

Speaking of the risk of global recession, stagnation, this risk does exist and we take it into account. Mr Zabotkin can comment on the actual assumptions of our forecast in terms of external conditions and the development of the world economy.


I would rather not dig into this issue right now as we will publish our monetary policy report in a week that will provide more details. However, basically, you are right, Dmitry. To call this stagnation or not is a matter of personal preferences, but our forecast really assumes that the growth rate of the world economy will be below the long-term trend.

QUESTION from RIA Novosti:

My question is about today’s decision. It was really quite sudden, and you have mentioned deflation several times already. Does this mean that the Central Bank has begun to consider deflation in its forecasts more meaningfully, assuming that deflation is more likely than inflation acceleration? Do you expect seasonal deflation in Russia as of the end of July, the end of August and, possibly, in September?


First of all, I was talking of disinflationary factors, disinflationary risks. This is about a slowdown of price growth, whereas deflation is a decline in prices, or, as we say, a negative price growth rate, a real decrease in prices. We do not observe any trend of deflation. I would like to repeat again, and we always say this, that deflation implies a steady decline in prices. This indicator should be analysed based on annual inflation, and it currently stays at a double-digit level.

A decrease in prices during certain weeks or months is quite a common situation we could observe previously. A reduction in fruit and vegetable prices is generally well known, but the decline in the overall price index this time was largely associated with a considerable downward adjustment of prices after their surge in February—March, and we still stick to this position. We do not observe any emerging trend of steady deflation.

QUESTION from the Life and Invest project:

My question is about what causes people’s worries. Currently, banks, brokers are introducing new fees associated with the custody and sales of foreign currency, difficulties with international money transfers. I guess you know this very well. People are now concerned about their risks of holding foreign currency in accounts.

There are a few questions that are really asked very often. Can US dollars be sanctioned in Russia? Is it possible that purchases and sales of US dollars in Russia will be totally forbidden? Can banks somehow freeze US dollars in accounts as it was with shares?  What are the risks of possible sanctions against the National Settlement Depository, excuse me, not the NSD, but the National Clearing Centre? What are possible problems that people might face holding foreign currency?


Frankly speaking, the use of US dollars has already been sanctioned, and not by us. The most severe version is what you can see in the sanctioned banks. They have difficulties with processing settlements, money transfers, and so on. Hence, foreign currency deposits can involve the risk of such sanctions that might be imposed against banks. Accordingly, people and companies should certainly take this into account. By the way, we can actually see that many companies do consider this risk and convert their assets (not only companies, by individuals as well) into safer, more reliable forms — if not into rubles, then into friendly states’ currencies.

As regards a possible ban on purchases of US dollars in Russia, as you know, cash in US dollars will remain in circulation even under such a dramatic, so to say, challenging scenario. I can give you just one figure. According to our estimates, the amount of foreign cash — US dollars and euros — currently held only by households totals nearly 85 billion US dollars. Today, banks may sell and purchase this foreign currency. Hence, foreign cash will remain in circulation, of course.

As regards the National Clearing Centre and the National Settlement Depository, some sanctions have already been enacted against the NSD. As to the NCC, other banks, we always factor in such risk of sanctions and, therefore, we are pursuing and encouraging the policy of dedollarisation. Banks need to dedollarise their balance sheets and largely convert them if not into rubles, then in friendly states’ currencies.

QUESTION from The Bell:

My question is about the fiscal rule. As far as I understand, it is still under discussion and it is too early now to talk of its parameters. However, I would still like to ask for some details about the sterilisation of foreign currency under the new fiscal rule. If the Central Bank seeks to offset the effect of foreign currency purchases to the reserves on ruble liquidity, it needs a certain sterilisation mechanism. Could you please say what you are discussing — foreign exchange operations, using liquidity in the banking system, or open market operations?

One more question, if I may. The third quarter has started. Are you recording any shortages in the products and services market? As regards the labour market, what are your forecasts about the situation in autumn?


Speaking of the fiscal rule and how it functions, the fiscal system first takes rubles from exporters and thus seizes these rubles from the economy. In the course of foreign exchange operations (we actually mirror these operations for the Ministry of Finance), these rubles return to the economy. This is how the sterilisation happens. Therefore, this is true, if the fiscal rule is reintroduced, such foreign exchange operations will be apparently needed.

Mr Zabotkin, do you have any comments?


I would just clarify to make it unambiguous that the purpose of the fiscal rule-based operations with foreign currency is exactly to return the rubles to the economy by purchasing foreign currency for additional rubles, for rubles collected as extra revenues. In other words, a foreign currency purchase under the fiscal rule is the operation that offsets the effect of the fiscal rule in terms of its impact on monetary aggregates. Hence, we definitely do not need any other additional moves.


As regards a possible deficit of products, indeed, certain goods are no longer available in our market, just as some brands, and so on. However, we can see that there are alternative products appearing in the market, they are certainly of other brands, other manufacturers, if we talk about consumer goods. This process will progress, but we do not see any systemic problem today.

As to the labour market in autumn, as I have already said, the situation is really stable and calm now and unemployment is at its record lows. Nevertheless, the situation in the labour market will largely depend on the pace of the structural transformation. What do I mean saying this? Some enterprises will reduce their output and cut jobs. However, there will be new enterprises in the same industries or other enterprises that will need new employees as they will find niches in the domestic market — this is how labour resources will move across companies and industries. This transfer will certainly influence the unemployment rate when people are temporarily job seekers.

Hence, it is critical for us now to monitor the situation — not only the general indicators, but also changes in vacant jobs and the level of demand for labour in other sectors. Of course, this may bring up the issue of retraining needed to address new tasks, and government programmes are essential in this regard. Accordingly, a lot will depend on the structural transformation. We do not give any quantitative forecasts about this.

QUESTION from the news agency Tatar-inform (Kazan):

I have two questions to you. My first question is as follows. During the pandemic, the key rate was cut to 4.25%. The current situation in the economy can hardly be described as easy. In this regard, we are really wondering about the red line of the key rate reduction for the Bank of Russia in today’s conditions.

And another question, please. It is no secret that we have a good grain harvest this year. Do you see any risk of food deflation in Russia this autumn? How will monetary policy respond if this happens?


As regards a decrease in food prices this autumn, this is possible. A good harvest is a disinflationary factor that will help slow down inflation. However, fluctuations of food prices are quite common. Considering the usual seasonality, this is not a factor that influences monetary policy as it responds to steady factors of inflation when deviations arise due to persistent factors and might impact inflation expectations, among other things, and bring about secondary effects.

Fluctuations of food prices are actually factors that change the current price level, but these factors usually have a one-time, temporary effect.

As to your first question, I would like to start out with the following. Indeed, we are comparing the current situation with the pandemic in many aspects, but these are actually two different crises. The pandemic crisis could be called a cyclical one when there was a demand shock at first due to the lockdown because people were simply unable to consume as they used to. We were cutting the key rate exactly to push up consumer demand. Demand recovered very quickly, even faster than we expected, but then we started to face supply problems that turned out to be more persistent. Disruptions in logistics and production chains made it impossible to ramp up supply sufficiently to meet the expanded demand. All this accelerated inflation in 2021 H2 and increased inflation expectations.

Today, we actually have a structural crisis largely catalysed by supply shocks. Moreover, economic potential is declining. In such a situation, a decrease in the key rate, even if it is very big, will not help offset these effects to the same extent as in 2020. Therefore, we are closely monitoring how consumer demand is changing and whether its movements correspond to supply trends. Probably, we should not compare these two episodes.

Speaking of the red lines you have mentioned, we do not have any upper or lower red lines for our key rate decisions. We will set the key rate level depending on the path that will help bring inflation back to the target in 2024.

QUESTION from the ProFinansy project:

My question is about recovering growth in lending to households. Now households, as you have already said, have switched to a saving behaviour model, and it is critically important for the economy to maintain a good lending pace. The question is as follows. Does the Central Bank set any time targets for lending recovery to the levels of 2021? If so, is the current level of the interest rate sufficient to reach such lending growth levels, in the Central Bank’s opinion, and to what extent?


What you are saying about setting a target level of lending is a different monetary policy framework. This is credit targeting, whereas we have inflation targeting. Of course, inflation is also influenced by both lending and other indicators. That is, the credit and deposit mechanism is undoubtedly important. This is an element of transmission, but we do not set any specific targets for lending and its level. For us, the main thing is the inflation forecast, and we make decisions based on our inflation forecast and the path needed to bring inflation back to the target.

Mr Zabotkin, would you like to add anything?


I can only add that the credit component, of course, comes as a part of the monetary policy transmission mechanism, a very important part of monetary policy. The credit channel is the most effective one, especially in the current conditions. But it is not an end in itself. Eventually, credit makes a contribution to money supply. Accordingly, money supply under the influence of both credit and other factors, including the budget and the situation with the balance of payments, should finally grow at a pace that will ensure the inflation rate of 4%. Exactly, this is the logic we use for making decisions on monetary policy.

QUESTION from Bloomberg:

Have you discussed possible depreciation of the ruble with the Government? Have you reached any consensus? Are the Ministry of Finance’s interventions in friendly states’ currencies possible? If yes, then in what currencies?

And another question, please. What is the status of legal claims for the return of the international reserves?

I have another quick question, if I may. You have said that imports have started to recover. According to our estimates based on data from Russia’s foreign partners who publish these data, imports began to bounce back in May and increased by 17% month-on-month. This recovery is rather relevant to consumer goods.

Could you share your assessments regarding the recovery of imports? Do imports of consumer goods exceed the last year’s levels?


As far as the exchange rate is concerned, we still believe that it should be floating and we should not switch to exchange rate targeting. However, we do not deny the possibility of foreign exchange interventions. Interventions are also possible with a floating exchange rate, but under the fiscal rule.

Therefore, we hold that, indeed, interventions are admissible. As to particular instruments, whether friendly currencies or some other instruments, this is rather the prerogative of the Government. But we are discussing this.

As for the status of lawsuits regarding the unfreezing of the gold and foreign currency reserves, this is a complicated process and we are at the stage of their preparation.

Speaking of imports, this sector has indeed begun to recover after its sharp decline, but this is about consumer imports only. We do not see any signs of a recovery in investment and intermediate goods imports. As for the figures, we disclose quarterly data. In general, imports of goods and services in Q2 plummeted by 22% year-on-year. This refers to the value of imports. We understand that prices for imports, transportation and insurance costs, and growth in world prices have probably led to a slightly sharper decrease in the quantities of imports.

Please, Mr Zabotkin.


If I may, I will say a little more about foreign exchange interventions. Again, with regard to the question, which we have already answered earlier, it should be understood that when foreign currency is purchased as part of fiscal rule-based operations, the rubles, which had already been in the economy and then were withdrawn from it, return to the economy. As a result, there is no money supply growth, and such operations do not create inflationary pressure.

When foreign currency purchases are conducted by central banks independently (the Bank of Russia actually used this practice in the 2000s, and many other central banks also do this from time to time), central banks inject new funds into the economy, which provokes inflationary pressure. Eventually, the nominal exchange rate will decline, but the real exchange rate will rise anyway. This growth will just occur due to higher inflation in the country.

QUESTION from Reuters:

I have several questions.

The first one is as follows. You have just talked about the fiscal rule. Does it mean that the Central Bank can start operations under the fiscal rule before the end of the year after it is adopted? That is, will the Central Bank purchase currencies of, let’s say, friendly countries?

The second question is about inflation and parallel imports. How do you assess the influence of parallel imports on prices? How significantly can this accelerate inflation? If the ruble’s nominal exchange rate decreases, would this mean that manufacturers will raise prices again because the ruble exchange rate will be weaker?

And one clarifying question about HSBC and Expobank. Has the Central Bank received requests from these banks and what is your opinion about this deal?


As regards our operations in the foreign exchange market under the fiscal rule, if it is introduced this year, we are certainly ready to conduct these fiscal rule-based operations. However, we will announce the parameters of these operations only after the decision on the fiscal rule is approved, that is, before the start of these operations, of course. We are going to be predictable in this regard.

What we will buy depends on the Ministry of Finance, because we will carry out these operations as instructed by the Ministry of Finance. Hence, particular foreign currencies for this will be determined by the Government.

As to the influence of parallel imports on inflation, we have a slightly different point of view. We believe that parallel imports will, on the contrary, have a disinflationary effect, because the supply of goods in the Russian market will grow. Therefore, there will be rather a disinflationary impact.

Mr Zabotkin, do you have any comments on parallel imports and exchange rate swings?


Actually, there is nothing to add about parallel imports. That is, your question implies that parallel imports are more expensive than similar imported products we had before. However, now we should compare this not with the previous situation, but with how this affects supply and demand in the new reality. Today, parallel imports certainly contribute to supply growth and, consequently, this is a disinflationary factor.

As regards the question about exchange rate swings, this is a very good question indeed. Thank you very much. Probably, we should now admit that the exchange rate changed very significantly both upwards and downwards. Possibly, those exchange rate levels that we observed in June—July have not yet fully passed through to prices, and I do not think that all companies have included them in certain business plans. In other words, businesses, in general, expect that a new equilibrium will be reached at a different level.

Accordingly, if there is some kind of reverse movements in the exchange rate, this will not create additional sustainable proinflationary pressure, but it will quickly remove temporary one-time factors associated with the exchange rate pass-through. We will faster see those steady price growth rates which are somewhat fuzzy now due to the pass-through of the ruble strengthening that occurred in March—June.


As to the HSBC and Expobank deal, we have not received any requests for approving such transactions.

QUESTION from the business portal Avant-Partner (Kemerovo):

How different, according to the Bank of Russia’s estimates, is now the socio-economic situation in Russian regions due to the sanction pressure? Which regions have started to lose more and which of them remain quite stable?


This is a good question indeed. The situation varies in different regions. In general, this is related to the structure of the economy in each individual region. For example, the decline is sharper in the North-West where the number of companies focused on European markets was traditionally higher. Consequently, these companies need to refocus towards other markets. Asian markets mean longer transportation routes, and it is clear that companies should somehow take this into account in their business plans.

There are also regions where trade is more oriented towards Asian markets or the domestic market and, hence, they are less affected indeed. For example, we see that in the South of Russia, where the agroindustrial sector and the tourism cluster are strong and the share of medium and small businesses is high, the downturn was less intense.

By the way, you can find more details about regional heterogeneity in our report Regional Economy. We publish it shortly before the quiet period. The report describes this difference and what happens in the regions, as well as how companies are adjusting to the new conditions.

QUESTION from Mergermarket:

As regards foreign currency deposits, both foreigners and Russians have such deposits. Resident banks behave as if they do not need money. As to individuals, they have no access to their deposits. Why then is it impossible for people to take their money and stash it away if neither the state nor banks need it? This is my first question.

It seems that Russians are under sanctions of their own state and that they may not get access to their money. Six months have passed, but they have not received any compensation. How can they get this money at all? Russian people asked me to address this question to you.


Indeed, now banks are not very interested in holding foreign currency. This is true. They therefore charge various types of fees for both transferring and raising these funds. Fees for transfers, by the way, are a forced measure introduced not because they want to make money on this, but because of the sanctions. If you need to transfer funds in foreign currency, and this is done through a foreign correspondent account, and if the money gets stuck there, then this is a risk for clients, not to speak of banks. Therefore, these are not banks who want to make a profit on such transactions, but such transactions have become very risky.

The same applies to foreign currency deposits. They can be frozen, and banks thus reduce these risks for their clients as well.

You have asked why people are not allowed to withdraw cash dollars and stash them away. Unfortunately, the problem is that it is also prohibited to bring in foreign cash to the country. This is due to the sanctions as well. For this reason, the supply of foreign cash in the country is limited. Available foreign cash is the cash that is already in circulation or held by banks and intended for their clients who may withdraw foreign cash within the permitted limit.

I’d like to remind you that this limit is 10,000 US dollars, and it is important that this limit covers 90% of all foreign currency deposits. That is, 90% of people who have foreign currency deposits may withdraw all their funds in foreign cash. However, not many people rush to do this.

This is why, unfortunately, what you are saying is of great concern to Russian people, but this is the impact of the sanctions imposed against our financial sector.

QUESTION from the Funny Money project:

I have two and a half questions. If I may, one and a half questions are about imports and another one is about foreign cash.

Speaking of imports, the Central Bank, assessing the key aggregates of the balance of payments in early July, reported a contraction of imports in Q2 by 22.5% year-on-year. This is considerably less as compared to the vast majority of expert evaluations available for the public before the publication of this report. This is why I said one question and a half.

If imports contracted by less than a quarter, and not by 30, 40 or more per cent, as many had previously assumed, does this mean that additional potential demand for foreign currency from importers is not such an effective tool for the ruble’s depreciation in the future, as it had been considered before you published your statistics?

I have another clarifying question about imports. There is obvious confusion. The estimates of imports according to the trading partners’ statistics and the data released by the Bank of Russia without detailing significantly differ. Don’t you consider that this is a problem and does the Bank of Russia plan to return to publishing information, at least, on foreign trade and the banking sector in the earlier volumes to avoid such confusion? This is about imports.

As far as foreign cash is concerned, I’d wish to ask a clarifying question regarding what you have said in your previous answer. Do I understand it right that you plan to extend the ban, which is currently in effect until 9 September, on withdrawal of the foreign cash purchased from banks by their clients after 9 March and the limit of 10,000 US dollars for the foreign currency purchased before 9 March?


As regards imports, there was a decline, and I should say, it was in line with our expectations. Experts made different forecasts, and in general, if you look at their forecasts on various macroeconomic indicators, they vary a lot. This is natural because the situation is very uncertain.

Indeed, according to our statistics, imports of goods and services dropped by 22%. Talking about the impact of imports on the exchange rate, we should focus not on imports, but on the current account. The latter is really record-high. Imports should be assessed relative to exports.

As regards the discrepancy between our figures and the statistics of the trading partners, as far as I remember, there has always been such a discrepancy because countries of goods origin are different, and so on and so forth.

Answering your question about the publication, we are really publishing the balance of payments as aggregated data now. We will be ready to start publishing a more detailed balance of payments if the Government discloses detailed information on foreign trade. We are very well aware that for analysts, experts, the availability of this information is very important, of course.

Would you like to add anything regarding this question? You are welcome.


First of all, I would like to emphasise that we understand that this information is actually important not only for analysts and experts. In reality, this is important for economic agents, both households and businesses, for them to understand and correctly interpret what is happening not only in foreign trade, but also in terms of exchange rate movements and so on. In this context, the return to the normal format of information disclosure is useful.

Speaking of imports, I just want to emphasise once again that this 22% decrease is a change in nominal imports. All the comments made about the scale of the shrinkage of both imports and exports were about the decline in real terms. Nevertheless, the change in dollar prices is quite significant. Therefore, I think that 22% in nominal terms is more or less consistent with what was expected in real terms — namely, more than a third.


As regards the extension of the restrictions which are still effective until 9 September, unfortunately, we have no reasons now to expect that the situation with the inflow of foreign cash into the country will change for the better in the near future. Those decisions of unfriendly countries, which I have already mentioned, that prohibit bringing in foreign cash to Russia are still in force. In these circumstances, Russian banks should be able to respect the rights of all their clients to access the earlier opened foreign currency accounts and withdraw the permitted amount of 10,000 US dollars.

For this reason, in September, we will have to extend the restrictions that we introduced in early March.

QUESTION from Telegram channel SHERGINA:

The Central Bank has recently presented its new concept, which is rather a development of the previous concept for the protection of investors’ rights, imposing a complete ban on the purchase of foreign securities by non-qualified investors.

My question is the following: what is the reason for such a total ban without distinguishing between friendly and unfriendly jurisdictions? We know that such a distinction exists for currencies, as we hear there are friendly currencies, which people can use to protect their savings from the devaluation of the ruble, for example.

And I cannot help but ask about lifting restrictions imposed on foreign securities in the NSD. Is there any news regarding this?


Indeed, in terms of protecting the rights of non-qualified investors, we suggest that non-qualified investors in the Russian market should not buy foreign securities issued by, as far as I remember, unfriendly countries, after all.

We will clarify our position regarding friendly and unfriendly states. A non-qualified investor does not often know or understand the risk of blocking such securities. Now many people found themselves in this situation. We don’t want the situation to get worse.

I think the people currently experiencing these problems are more likely to understand why we introduced such ban.

As for the question regarding blocking of securities held in the NSD, the Moscow Exchange is now actively engaged in this problem. The Moscow Exchange has created a club to protect investors, which unites the representatives of top banks, brokers, management companies and professional communities. The purpose of the club is taking a collective action to defend the rights of investors and filing lawsuits to challenge the decisions regarding the NSD. 

QUESTION from Frank Media:

I have three questions. The first one is a clarification regarding the sale by foreign banks of their Russian subsidiaries. Could you please tell us, if the parties are in the middle of negotiations, do they have to cancel them and terminate transactions?

The second question. The Central Bank is the only one having access to the financial statements of banks. How did they finish 2022 H1 — above or below the Central Bank’s expectations?

One more question. The Central Bank feared that payment of dividends and various payments to management would negatively affect the financial stability of banks. Were these fears realised?

And my third question is about NPFs and pension savings. You have always advocated a more thoughtful and conservative approach to investing pension savings and NPFs’ reserves. But now that many investors have left the market, there are more and more suggestions to invest pension savings in various projects. Could you tell us whether you have changed your opinion about this? Do you think that more instruments and higher risks should be allowed when investing pension savings?


As for the sale of Russian subsidiaries of foreign banks, if the negotiations are underway, I think that in any case a preliminary authorisation of the government commission is required, as the probability of obtaining it is small, so to speak.

Regarding the analysis of the financial situation of banks, indeed, at present banks are not required to disclose their financial statements yet. But we think they should start doing this. Same as with the balance of payments, we think that banks shall be transparent to their clients, depositors, and partners. We are now actively discussing the format and timeframes for banks to start disclosing their statements.

Speaking of qualitative assessment, banks have got through the crisis better than we had expected, after all. We concluded that now there is no need in capitalisation of the banking system. In February—March, I personally thought that, as the shock to the financial sector was so huge, despite the previously created prudential buffers, additional capitalisation of banks would be required. Now we see no need for it.

Probably, the owners of some banks will need a helping hand to improve the situation. And we want to progressively cancel regulatory relaxations (we see that banks are ready for this), not all of them at a time, but in a smooth manner.

Regarding dividends, yes, some banks pay dividends, but our position was as follows: if a bank’s financial standing is good and it does not use regulatory relaxations we introduced, basically, the bank can afford to pay dividends.

The third question is about pension funds, and it is a very good question. There are many proposals for pension funds to start investing more actively and amply to boost the structural transformation of the economy. It is fine, but for us as the regulator, the safety of pension savings and the reliability of their investment is a priority. Yes, we may consider a broader toolkit, but without compromising the reliability and safety of pension savings. This is our top priority.

In fact, we lack a class of institutional investors. We have to more actively develop all types of collective investment, including direct investment funds, and their regulation. We discussed incentives to be introduced, maybe tax reliefs. Such institutional investment in a form of direct, collective investment, of course, needs to be developed.

QUESTION from broadcasting company Mir Belogorya, Belgorod:

We have two questions. In recent months, the number of ‘business deaths’ has increased across Russia, and in our region as well. Do you think the measures taken to support businesses have been sufficient? Are new mechanisms being developed? And how would you assess in general the prospects of business climate in our country?

One more question. You mentioned several times that you would not seek to reduce inflation at any cost. Which rate of inflation are you ready to allow for now, provided that loans should remain affordable? Can inflation rise soon after a decline? What will be the monetary policy if this happens?


As regards ‘business deaths’, indeed, closures of legal entities increased in 2022, as compared to 2021. However, we probably cannot make any judgements based on year-on-year data, as in 2020, for example, more legal entities winded up their operations during the pandemic, if we compare the closures.

The rate of closures is not the most important factor here. It is rather a simultaneous creation of new legal entities and the expansion of the scale of their operation, as the structural transformation will really mean that some entities will reduce output, maybe, even wind up, but others will expand their output, and new companies will be established.

As for business sentiment, it varies to a large extent, and there are different indicators. We have our own business sentiment indicator; it is measured by surveys. It has been showing some improvement in recent months, which is an optimistic sign.

Regarding inflation, we do confirm that in the context of economic restructuring a spike in inflation can be followed by a period of increased inflation, deviating from our target. Next year, I will say it again, we forecast inflation at 5–7%, which is above our target of 4%.

Indeed, during some periods, inflation, or the price growth rate can edge up. For us, it is important to understand whether it was caused by one-off factors or it is a stable trend. If the rise is steady, we can and we will react by the changing the key rate to bring inflation back to the target of 4%, as confidence in price stability is a very important factor including for reducing interest rates on long-term loans. Affordable long-term loans are not possible when inflation is high.

That is why price stability has always been our priority.

QUESTION from TV channel Russia-24:

In some liberated territories of Ukraine, such as the Kherson and Zaporozhye Regions, the Russian ruble has been put into circulation. When the ruble is expected to become legal tender in these and other liberated areas?


In fact, the ruble is used in these regions along with the hryvnya. It is difficult for me to talk about any timeframes in this respect.


I have a question about the NCC. In June, when sanctions were imposed on the NSD, you pre-emptively recommended that banks should reduce their foreign currency positions in the NCC. Have the banks followed your recommendation? How much have their currency positions decreased over this month after recommendations? Has the banks’ open currency position changed following the increased dedollarisation in Russia?


The Bank of Russia sees positive dynamics in the process of reducing foreign currency balances in the NCC and NSD accounts. In general, our banking sector has a long open foreign currency position. It has slightly grown in recent months, but it is lower than in March. 

This happens because dedollarisation of liabilities progresses faster than dedollarisation of assets. In other words, if banks have long-term foreign currency loans and so on, much work should be done for the conversion of foreign currency accounts into ruble-denominated assets. Anyway, dedollarisation of liabilities is faster than that of assets.

We see that banks continue to take active measures for dedollarisation of their balance sheets not only under our influence but, unfortunately, under the pressure of sanctions as well. They are aware of this risk. Although we did introduce temporary regulatory relaxations as regards the foreign currency position for the banks under sanctions, they should have plans to reduce foreign currency in their balance sheets, as we are not going to extend this regulatory relaxation after 1 January 2023.

QUESTION from Kurskaya Pravda (Kursk):

Over the last few months, the Bank of Russia has taken diametrically opposite key rate decisions — from a sharp increase to a decrease to the last year’s level. Don’t you think that such decisions of the Bank of Russia might mislead both households and businesses who are already in conditions of high uncertainty? Maybe it is reasonable to drop the key rate to its minimum level of 2–3% right away?


We think it has nothing to do with misleading. I agree that uncertainty is very high and the scale of international environment changes is unprecedented. Nevertheless, even under such uncertainty we think it is important to maintain key features of stability, namely price and financial stability.

That is why our decision on a sharp increase in the key rate was primarily necessitated by our intent to restore financial stability. Then the key rate was smoothly decreased in order to ensure price stability. We think these are the key features for businesses and business planning.

Let us think of what could have happened if we had drastically reduced the key rate to 2–3% as you suggest. Most likely, deposits would have disappeared quickly. I have already said that households transferred their funds from time deposits, where they are less liquid, to current accounts, or accumulation accounts, where they can be freely used for payments. In other words, this indicates that households prefer to withdraw their money and spend it on consumption, thus reducing their funds with banks.

With deposit rates at 2–3% amid double-digit annual inflation, it is understood that households would rather spend their money on goods and services to make sure their deposit money would not depreciate. And meanwhile there would be no increase in goods, including imports, following such a drop. This would result in inflation acceleration, and price stability would be impossible.

That is why such a drastic reduction in the key rate to minimum levels would lead to higher inflation and depreciation of household savings. These actions would not make loans more affordable, as when banks focus on the key rate when issuing short-term loans, but they check with inflation when dealing with long-term loans. Of course, with the 2–3% key rate and, let us say, two-digit inflation, credit rates will definitely be at two-digit levels.

This is why no positive effect would be expected. Our actions related to the key rate and a decrease in inflation are aimed at ensuring adequate long-term loans at affordable interest rates.

QUESTION from the Invest Future project:

A few words about the labour market. You have said you would not comment on unemployment but still. You have mentioned that the labour market will be changing. It means that labour skills will evolve. How can this affect wages, demand, inflation, and monetary policy?

And another question, if I may. It is something of a conspiracy theory, considering the interest rate was cut so drastically today. Is this due to the fact that the geopolitical situation is now aimed at cutting Russian oil exports and, furthermore, introducing oil price caps. What does the Central Bank think about this in general?


As for the labour market, the structural transformation of the economy will definitely be accompanied by structural changes in the labour market. Some professions will be more in demand while others will suffer a slight set-back. These are the movements that will take place. Wages will also be changing very differently across sectors. By the way, if you recall, after the COVID-19 pandemic, remote services began to develop very actively and there was a dire shortage of IT and cybersecurity specialists, and so on. This is also an example of the structural transformation.

How can this affect the overall unemployment rate? On the one hand, this depends on how quickly the labour force will exit those sectors and enterprises that are shrinking and how quickly workers move to those that are growing. This pace will depend on how highly people’s professions, skills, knowledge, and specialisation will be demanded and whether they need to retrain and how long this may take. Of course, this is a complicated process. Therefore, it is very difficult to make any quantitative assessments, but this process will certainly take place. It needs monitoring. Of course, aggregated unemployment statistics will affect inflation. We will consider this in our monetary policy.

As for geopolitics and a possible cap on the oil price, I do not even want to speculate right now whether it can be imposed or not. However, in my opinion, if such cap is introduced in any form, it will obviously lead to higher world prices. As far as I understand, we will not supply oil to those countries that will set this price cap. We will reorient our oil and petroleum exports to those countries that are ready to interact with us.  Since this will happen amid higher world oil prices, even with a possible decrease in quantities, this may have a lesser effect on all indicators, let us say, the exchange rate and the balance of payments.

Of course, this is within the competence of the Government. My comment is rather on what it might look like — as an impact on macroeconomics.

QUESTION from Vedomosti:

I have a clarifying question and a full question so to say, if I may.

It is about the fiscal rule. Which currencies do you think are appropriate for keeping additional oil and gas revenues with respect to this framework?

And here comes my full question. The draft law on electronic archives is currently being discussed and prepared for the second reading. Is the Bank of Russia involved? Are there any objections or comments from the Bank of Russia? What option does the Bank of Russia think is the best one for digitising bank documents? Has the Bank of Russia been given any support? Is such option taken into account in the draft law?


Regarding the fiscal rule, within the framework of the fiscal rule, this will be the accumulation of assets of the Government and this question should be addressed to the Government. We are ready to discuss it with the Government in a consultation mode. However, I think the set of assets suitable for storage is limited. Friendly countries’ currencies can be discussed among others. We need to assess the stability of these currencies and market liquidity. All these parameters are considered when placing assets.

Speaking of electronic archives, basically, we certainly support the transition of all archives from the paper to electronic format. We know that banks incur huge costs because of the storage of archives in the paper format. Eventually, they are included as some percentage in interest rates on loans. Therefore, of course, complete digitalisation is very important.

We have developed our own digitalisation programmes in the Bank of Russia. We have digitised many processes and documents and we are also digitising everything that is allowed to be stored in the non-paper format. We will provide details on the draft law, if needed, but now I do not have this information at hand.

QUESTION from Interfax:

The Central Bank is always talking about restoring retail investors’ confidence in the securities market. However, as far as we know, Gazprom’s decision to suspend its dividend payouts has greatly shaken their confidence. They are upset. How can this confidence be regained? In connection with this decision, do you think that some corporate actions of Gazprom (a stock buyback, for example) could allow them to regain this confidence?

One more question, if I may. What national indices is the Central Bank working on? Is it just the oil benchmark or maybe a certain precious metal index?


I agree that retail investors’ confidence is currently extremely important. It will be necessary to take measures to improve the confidence of retail investors as there have been many events with negative effects on their sentiment, including those related to the introduction of external restrictions.

I find it difficult to comment on any Gazprom’s corporate actions. I will not do this; however, it is obvious that the dividend yield is one of the elements retail investors are counting on. No doubt, this should be taken into account when we speak about the return of retail investors’ confidence.

Regarding the national indices, basically, the national price indices are very important for us. This is a valuable source of information about market prices in the conditions when we can no longer rely on global indices that we have actively used. We have already built the first wheat index and we work jointly with the Government on a whole set of such indices. This primarily includes raw materials and any exchange-traded commodities in general.

The launch of such indices is highly dependent on users’ interest to employ them. For example, there was an active interest of potential users in agriculture.  Therefore, this work will be actively continued, including with regard to precious metal indices.

Thank you very much.

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