Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 19 June 2026
Good afternoon. Today, we have made the decision to cut the key rate to 14.25% per annum.
As we expected, business activity indicators improved slightly in April–May, after weak dynamics at the beginning of the year. Current price growth has slowed down, largely on account of one-off factors. Measures of underlying inflation have edged down as well, owing to the accumulated effect of tight monetary policy and the narrowing gap between demand and supply potential. However, proinflationary risks have increased significantly. Over the next three years, fiscal policy will be more expansionary than is assumed in the Bank of Russia’s baseline scenario. Lending growth has accelerated notably in recent months. This can limit the room for a further key rate reduction, which has required us to take a more cautious decision today.
I will now explain the reasons behind our today’s decision.
Firstly, inflation.
Current price growth rates have declined considerably in recent months, mainly under the influence of one-off factors. For example, spring saw fruit and vegetable prices decrease faster than usual. The ruble appreciation over recent months against the background of high prices for key Russian exports has also contributed to the price growth slowdown.
Nevertheless, underlying inflation is a more important factor in our decisions. It has decelerated as well, albeit less notably, and remains within the range of 4–5% in annualised terms, according to our estimates.
As regards inflation expectations, they have decreased among both businesses and households, but stay elevated.
The inflation rate in June will be affected by the spike in fuel prices that has occurred. The Russian Government takes the necessary measures, but it might take some time for supply to rebound. Higher prices for petrol may also influence inflation expectations, as this product is fairly important for both people and businesses. Besides, in recent weeks, the dynamics of vegetable prices have reversed after their unusually strong decline during the spring months. This is already evidenced by high-frequency data.
Bringing the topic of inflation to a close, I would like to highlight the statistical effect that will impact annual inflation measures over the next few months. Housing and utility rates will not be raised in July as they were last year. In 2026, their indexation was rescheduled for October, which means that annual inflation might edge down temporarily due to this factor. However, this will only be an intra-year redistribution of price growth.
Secondly, the economy.
According to high-frequency data, in 2026 Q2, indicators of economic activity are improving, as expected. Temporary factors that were constraining it in early 2026, including calendar and weather effects, have been exhausted or have reversed. Specifically, there is a slight rebound in construction, which was the main contributor to the GDP decline in 2026 Q1 due to a cold and snowy winter. When analysed as a whole over 2026 H1, economic dynamics can be characterised as moderate growth in the output of goods and services.
However, the situation varies greatly across industries, and this heterogeneity has increased in the past year. The above is largely associated with the structural transformation of the economy. While government demand growth is accelerating notably, the room for private – investment and consumer – demand growth is decreasing, given limited resources. The increase in sectoral heterogeneity is also driven by more short-term factors, such as the situation in global commodity markets and temporary disruptions in the operation of certain production facilities.
As for consumer activity, it has continued to grow moderately. Car purchases were on the rise in the spring months. Demand in the services segment remains high.
Consumption is supported by wage growth, although the latter has somewhat decelerated, with enterprises planning more modest indexations in the future. In addition, wage dynamics are highly diverse across industries and types of activity, reflecting the heterogeneity in the economy that I have already mentioned.
Overall, tightness in the labour market is easing slowly. According to Bank of Russia regional branches, labour shortages have stopped to ease in a number of regions over recent months. In this context, a sustainable decrease in cost and price pressures requires a further narrowing of the gap between growth rates of wages and labour productivity. Moreover, I would like to emphasise that to boost labour productivity, it is critical that the workforce is utilised to the maximum extent in the sectors where it delivers the greatest economic benefit.
Thirdly, monetary conditions.
Interest rates in most financial market segments have continued to decline smoothly under the influence of monetary policy decisions made earlier. Contrastingly, longer-term OFZ yields have risen slightly. This is associated with the increase in the term premium, driven by uncertainty regarding fiscal policy.
I would like to note that most corporate loans, especially to large and medium-sized companies, are currently granted at floating interest rates. For such loans, a key rate reduction translates, immediately and fully, into a decrease in interest payments not only on new loans, but also on existing ones.
The saving ratio stays rather high, albeit edging down. Households’ ruble funds with banks continue rising. Among banking products, demand for savings accounts is growing. People are also increasingly interested in investing in financial market and non-financial instruments.
April–May saw lending growth speed up notably. In the retail segment, there was an uptick in unsecured and car loans, as well as in market-based mortgages. Corporate lending growth rates have increased considerably.
Currently, the dynamics of monetary indicators requires our special attention. First, if accelerated lending growth becomes a persistent trend, rather than a short-term spike after low levels at the beginning of the year, this might mean that current monetary conditions are no longer perceived as restrictive by borrowers.
Second, the contribution of fiscal policy to the increase in money supply remains elevated and, in case of the budget parameters revision, will be greater than we assumed before. In this context, if lending continues growing at such high rates, we might be required to pursue tighter monetary policy than expected in the baseline scenario. The total effect via the fiscal and credit channels has already caused the increase in money supply to nudge the upper bound of the expected range and even exceed it slightly. Taking into account certain time lags of our decisions’ impact on the economy, the above already requires a more restrictive monetary policy stance than assumed in our April forecast.
Now, I would like to speak of external conditions.
The situation in the Middle East has pushed up commodity prices. These changes have already started to translate into inflation acceleration in many countries. A number of central banks have responded to the increase in proinflationary risks by raising their policy rates. Concurrently, expectations regarding global economic growth are declining.
For the Russian economy, disinflationary effects have been predominating so far. Namely, higher prices for commodities have pushed up export revenues and led to the ruble appreciation. Demand for imports has risen as well, albeit less notably than the value of exports.
Risks of a prolonged Middle East conflict have declined. However, there is still uncertainty regarding the scale of its proinflationary consequences for the world economy, which might affect the Russian economy via imports prices and logistics costs.
I will now speak of the overall risks.
According to our estimates, the balance of risks has shifted towards proinflationary ones even more. As regards the risk related to the revision of fiscal policy parameters, we can say that it is essentially already materialising. However, its scale remains uncertain. Both fiscal and monetary policies affect demand in the economy. When the contribution of fiscal policy rises to meet the priority objectives, monetary policy should act as a stabiliser. Its tightness should change accordingly to somewhat reduce the contribution of credit to aggregate demand. This is the only way to avoid an upward deviation of demand from output potential and, consequently, another inflation surge.
Risks associated with labour shortages and inflation expectations persist. Proinflationary risks stemming from a temporary decrease in supply have risen in certain industries. As regards risks related to the external environment, I have already mentioned them.
Weaker dynamics of domestic demand, as compared to our baseline estimates, remain a disinflationary risk.
Winding up, I would like to comment on our future decisions.
Current price growth rates have declined significantly, but we are seeing a rise in the risks that might lead to inflation acceleration in the future. Those that can have a lasting effect on demand and prices in the medium term are particularly significant to us. Monetary policy influences the economy and prices with certain time lags. Therefore, our decisions should be forward-looking.
I would like to emphasise that neither a further key rate cut nor the size of it is predetermined at any particular meeting. We might need to take pauses to analyse all incoming information and the effect of our earlier decisions. It is only by maintaining a balanced approach, especially amid high uncertainty, that we can achieve a sustainable result and stabilise inflation at a low level.
Thank you for your attention.
Q&A for the Media
QUESTION from TASS:
What options did the Board of Directors discuss today? You have already said that further steps are not predetermined. However, has it become more likely that you will change the key rate by 0.25 percentage points again at your next meeting?
ELVIRA NABIULLINA:
This time, the Board of Directors substantively considered three options: keeping the key rate on hold at 14.5% or cutting it to either 14.25% or 14.0%. Notably, economists also highlighted these three alternatives in the surveys.
Each option was supported by strong arguments from a substantial number of discussants. I believe that the final decision is indeed the result of a thorough examination of all the arguments, including an assessment of the cost of a policy error.
To generalise, the discussants’ opinions differed on three main parameters.
The first one is the assessment of the stability of underlying inflation measures observed in recent months. It is essential to understand whether these measures of underlying inflation are stable and how stable they are in reality.
The second parameter is the assessment of the scale of additional proinflationary factors that have arisen over the inter-meeting period. A shift in the budget targets for 2026 and the next few years is a demand-side factor, while a temporary reduction in fuel output is a supply-side factor, among other things.
The third parameter is the assessment of the tightness of monetary conditions. This is critical, given a substantial acceleration of lending over the past two to three months.
Almost all discussants pointed out that the Bank of Russia had less room to cut the key rate further. However, the step of this reduction was a matter of discussion and will likely remain a subject of debate at the next meeting.
QUESTION from Interfax:
You have just said that the Bank of Russia now has less room to cut the key rate further. How strongly has fiscal policy influenced that? Are there any risks that the situation in the fuel market might further limit room for manoeuvre and trigger second-round effects, such as higher prices for other products, e.g. food, and rising inflation expectations?
ELVIRA NABIULLINA:
Generally, in our view, the Bank of Russia now has less room to cut the key rate. We will scrutinise this issue at the next meeting, which will be a core one. However, it would be difficult to quantify the direct effects of these factors. Nevertheless, we can say that the influence of proinflationary factors has intensified.
As for transitory supply-side factors, an essential issue is how the situation will unfold and whether these factors can transform from transitory ones into persistent inflationary pressures, primarily through an increase in inflation expectations, given that petrol is a salient item. Incidentally, June’s surveys do not show such an increase.
We will look at the dynamics of inflation expectations in July’s surveys to be released before the next meeting. It is important to see how this will generally affect costs across a broader range of goods. These are the factors we need to assess. I would like to repeat that this was indeed a major factor we took into account when making a well-balanced decision and slowing the pace of the key rate decrease.
QUESTION from Bitkogan project:
In your press release, you noted that the Bank of Russia might need a higher key rate path. Is this related to 2028?
ELVIRA NABIULLINA:
As I have already said, we will present our updated view of the key rate path at the core meeting and will assess the trajectory that we might need in 2026, 2027, and 2028.
Nevertheless, changes will most likely affect the 2026–2027 period to a greater extent. However, this is still an issue to analyse and estimate.
ALEXEY ZABOTKIN:
Without anticipating July’s meeting, since the forecast depends on all factors and not only those that have changed by now, we should recognise that if fiscal policy in 2028 is pursued in a way that the structural primary deficit persists, this would mean that monetary policy should offset that, all else being equal, and therefore, it is unlikely to become totally neutral in 2028.
ELVIRA NABIULLINA:
All else being equal, this includes taking into account how that change in fiscal policy will affect the level of the neutral rate, which we will estimate. We estimate the neutral rate every year before publishing the Monetary Policy Guidelines.
This is why we cannot give any specific figures now, but there will be more certainty about this by the next meeting, I think.
QUESTION from Economikal channel on Telegram:
I continue developing my macroeconomic model that attempts to predict your decisions. Today, the model predicted a 70% probability of a 0.5 pp decrease in the key rate and a 30% probability of a 0.25 pp cut. This decision of the model (not of the Bank of Russia) largely relied on estimates of inflation, while my estimates were even worse than those in your press release. In other words, the actual figures turned out to be better, whereas my model assigned a higher probability to a 0.5 pp reduction.
However, I would like to clarify the following: a 30% probability was associated with the fact that households’ inflation expectations are still rather high, unemployment is quite low, and the Russian fiscal system has a structural deficit, which is a new factor that you emphasised in the press release.
In view of this, my question is about the impact of monetary policy and its tightness on money supply growth through the fiscal channel. This is an important factor, but currently, it looks as if monetary policy and key rate decisions largely influence the private sector, while producing a smaller effect on the fiscal channel.
ELVIRA NABIULLINA:
Of course, our decisions affect market-based lending growth first and foremost. This is why we always reiterate that the proportion of subsidised lending is critical to us since most subsidised loans are not responsive to our key rate decisions. The Bank of Russia primarily influences private lending.
Our monetary policy certainly affects the budget as well, specifically through debt servicing costs since the fiscal system has domestic debt and also because the fiscal system largely accepted interest rate risk under subsidised programmes. However, in general, monetary policy has no direct effect on the fiscal channel – rather the opposite: when the Government prepares its decision on the budget and the State Duma approves it for fulfilling priority tasks, while the economy uses all the resources available, the Central Bank plays a compensatory role. In other words, taking the amount of inflows through the fiscal channel as a given, we should adjust our monetary policy in a way that the amount of funds received by the economy through private lending would prevent inflation from spiralling out of control.
What complicates the process is that our decisions have a time-lagged effect, which I have already mentioned. This means that it takes from three to six quarters for our current decisions to translate into the economy. This is why it is critical to us to know fiscal policy parameters as early as possible. Therefore, there is indeed a connection, but the Bank of Russia rather plays a stabilising role.
QUESTION from NGS55.ru, Omsk:
Has the Central Bank revised its key rate forecast after it was claimed at the Saint Petersburg International Economic Forum that the key rate should be single-digit by the end of the year?
ELVIRA NABIULLINA:
No. Firstly, I would like to reiterate that we have not revised our key rate forecast this time. We revise it in preparation for our core meetings on the key rate (the next one will take place in July) when we update our macroeconomic forecast as a whole, since the key rate forecast depends on how our view of future developments changes in general.
As for a single-digit level of the key rate, our April forecast did not assume its reduction to such a level, i.e. below 10%, this year.
As I have already said, proinflationary risks have even risen. Accordingly, if we decide to revise the forecast of the key rate path, we will likely revise it upwards rather than downwards. It seems that the Bank of Russia now has less room to cut the key rate until the end of 2026 and, probably, 2027 (I have also been asked here even about 2028). This is not because we think that aggregate demand should cool down more – and I would like to stress that I am talking about aggregate demand – but because the contribution of government demand to both aggregate demand and GDP growth will be greater in 2026 and 2027, and therefore, the contribution of the private sector should be smaller. Otherwise, there will be no additional increase in GDP, as all these measures aimed at boosting demand will only accelerate inflation. We need to avoid this since both households and businesses will face higher costs and thus incur losses as a result, including those companies that are now asking to cut the key rate faster. If inflation speeds up, market rates will not decline, just the opposite – they will grow. Therefore, our objective is to prevent such a situation.
We certainly listen to business representatives and analysts and their arguments and take them into account, including those we heard at the forum, and discuss them with colleagues when considering these issues at the Board of Directors meetings. However, we rely on our own analysis when making our decisions. We explore a wide array of information, including statistical and high-frequency data, among other things, and prepare our medium-term forecast of future developments factoring in the time lags of monetary policy.
QUESTION from Izvestia:
Is the Bank of Russia facing additional pressure with respect to its monetary policy, considering that representatives of various ministries and companies increasingly claim that the key rate should be cut faster? Given these discussions, is the regulator now relying in its decision-making on a wider range of economic indicators, specifically those associated with higher business risks?
ELVIRA NABIULLINA:
As I have already said, the Bank of Russia does take into account analysts’ and businesses’ opinions. Indeed, a large number of government and business representatives support a key rate reduction, which is quite understandable. However, we do not perceive that as pressure, which I have already spoken of several times. Our decisions are independent and based on our own analysis.
We have always relied on a wide range of indicators, including not only inflation measures, but also inflation expectations as well as labour market and economic activity indicators across various industries and regions.
We pay particular attention to business surveys. I would like to remind you that we conduct regular monitoring of nearly 15,000 companies, the results of which are publicly available and provide valuable insights.
Of course, we hold meetings with businesses. The Bank of Russia already has a wide range of indicators that we discuss.
Some people tend to simplify the process, e.g. by saying that the Bank of Russia only factors in the unemployment rate. This is not true. We always stress in our statements that the Bank of Russia analyses a wide array of data, characterising the situation in the labour market, including temporary employment, downtime, CVs and vacancies, wage growth rates, and the correlation of these indicators with labour productivity, including across industries and regions. We scrutinise a long list of information in each area.
Your question is highly relevant, since decisions should rely on comprehensive data characterising the economic situation.
QUESTION from Reuters:
We are happy to see that you are fine. Your prolonged absence prompted a lot of speculation about management reshuffling and your plans to leave the Bank of Russia. Could you please confirm or refute these rumours?
ELVIRA NABIULLINA:
I can only confirm that I simply caught a cold and lost my voice, and I thank those who were sincerely concerned about my health.
QUESTION from RBC:
Does the Bank of Russia have any information about a tightening of the fiscal rule parameters for 2027 with the cut-off price to be reduced to $50 per barrel? Does the regulator participate in the discussions on this issue? How will these new parameters affect monetary policy?
ELVIRA NABIULLINA:
Our view in this regard has remained the same. Firstly, we believe that the fiscal rule is a fundamental principle of macroeconomic stability and that the current cut-off price is rather high in terms of conservative estimates of long-term crude market trends and should be lowered in order to ensure long-term stability of public finances and macroeconomic stability.
Of course, the level of the cut-off price is within the mandate of the Government. Nevertheless, I should say that a lower cut-off price under the fiscal rule would certainly ensure a stronger basis for macroeconomic stability. We will take this into account when making our monetary policy decisions.
ALEXEY ZABOTKIN:
We are aware of this discussion and we know how changes in the fiscal rule in 2027 may affect monetary policy decisions.
QUESTION from Market Power project:
The conflict in Iran has ended, according to the US authorities. Crude prices are dropping. What can you say about possible risks to Russia’s budget, balance of payments, and the economy in general in this scenario? How do you estimate the impact of this three-month conflict on the domestic economy in the medium term?
ELVIRA NABIULLINA:
Speaking of risks to the balance of payments associated with the end of the conflict, you probably mean that the crude price might start declining. The point is that these risks are mitigated and offset by the fiscal rule, which we have been talking of, and therefore, I could say that we do not see any significant risks in this regard.
As for the overall effect, it is difficult to evaluate it so far. It would be premature to assess the fallout from the conflict, even if it ends completely, on the world economy and global inflation.
We can see that the conflict has already affected price growth and economic dynamics in many countries. It can also affect the Russian economy in terms of future demand for Russian exports.
Currently, this crisis has a disinflationary effect, since export earnings have increased and the ruble has strengthened. However, there are proinflationary effects as well, including rising logistics costs for Russian businesses and higher import prices; that is, proinflationary risks do exist.
As we said earlier, the longer the conflict drags on, the higher proinflationary risks will be. Currently, we believe that, if the conflict is settled, proinflationary risks will weaken compared to our earlier assumptions.
QUESTION from Nizhegorodskaya Pravda, Nizhny Novgorod:
The key rate reduction cycle has continued for a year already. How has this influenced the credit market? Have corporate loans or mortgages become more affordable or have banks developed any new offers?
ELVIRA NABIULLINA:
Indeed, the key rate cuts have boosted market-based lending. For example, over the first four months of the year, mortgage lending increased nearly fourfold year on year.
Unsubsidised corporate lending expanded as well. According to our regular monitoring of businesses, which I have already spoken of, fewer companies now report a lack of funds to finance working capital among the major challenges they are facing. In quantitative terms, the proportion of such enterprises dropped to 10%, which is almost 1.5 times lower compared to the level before the start of the key rate reduction cycle.
Currently, we can see that the key rate increase and high interest rates of the previous year were indeed a bitter but necessary pill to swallow.
According to this monitoring, the key factor for businesses a year ago was higher costs, which actually implies inflation risks. Nearly every fourth respondent complained about this. The problem of rising costs still persists, although it has become less pressing: today, this is a matter of concern to every fifth company, which is a direct result of lower inflation owing to tight monetary policy.
QUESTION from RIA Novosti:
Do you have a preliminary estimate of year-to-date GDP growth? Do you see any risks of overcooling in the economy and what level of the key rate does the Russian economy need to expand more quickly?
ELVIRA NABIULLINA:
According to our estimates, the economy has generally continued to grow moderately in 2026 H1, which I have already mentioned. As reported by Rosstat, GDP edged down by 0.2% in 2026 Q1, but, as we have said, that was largely attributable to one-off factors, including both weather and calendar effects.
In April, GDP began to recover and economic growth over January–April is estimated at 0.3%. We expect that the growth rate will reach about 0.5% as of the end of 2026 H1.
High-frequency data show that business activity in the country continued to expand in May. As I have already said, we can observe a faster rise in consumer activity as well. We do not see any risks of overcooling in the economy.
I would like to reiterate that the main indicators of overcooling that the Bank of Russia and most economists focus on are a considerable downward deviation of inflation from the target, an increase in unemployment, and a decline in households’ real incomes. We see none of these signs. Our well-balanced monetary policy helps prevent such a situation in the economy.
As regards your question about the level of the key rate needed to boost economic growth, for the domestic economy to expand at a sustainably high pace it needs mechanisms and institutes that would help develop production capacities and enhance labour productivity, which mostly depends on the efficiency of factors of production rather than the level of the key rate.
QUESTION from InvestFuture project:
My question is about the labour market, which you have already discussed. We currently see that unemployment stays close to its record lows, while the dynamics are confusing, since large companies continue reducing their staff.
As estimated by the Ministry of Labour and Social Protection, nearly 7.5% of employees can be replaced by artificial intelligence in the near future. These data are contradictory in a way. How would you assess these changes? Do they mean that the labour market is easing now, which you have long been waiting for, referring to the labour market tightness as a major factor? How can this affect your overall estimates and possible key rate decisions?
ELVIRA NABIULLINA:
We do see certain signs of an easing in the labour market. However, the pace of this easing is decelerating and, according to the surveys for the past two months, the proportion of companies facing staff shortages has not declined.
Indeed, a certain percentage of laid-off workers and downtime at some enterprises are what many focus on. These cases certainly attract attention, but speaking of the economy as a whole, they are quite rare and their scale has not been growing. According to our estimates, this relates to about 0.3% of the employed.
Indeed, some workers are being laid off. However, unemployment is not increasing, which proves that, even if certain companies laid off some specialists, they are quickly absorbed by other enterprises.
As for artificial intelligence, it is not producing any macroeconomic effect on the labour market and has not become a determinant so far. Indeed, certain companies that are using artificial intelligence efficiently have managed to enhance labour productivity. This factor will be playing a greater role over time, in my opinion.
Summing up, I would like to emphasise that the labour market is a critical but not the only factor that we take into account when making our key rate decisions. We need to pay attention to the entire range of factors impacting the economy and inflation.
QUESTION from Delovye Novosti, NTV channel:
My question continues the topic of pressure from businesses and is somewhat connected with sports. There is such a thing in football as scoring an own goal. Why is the Central Bank unable to persuade businesses and many financially literate people that it is not backfiring on the domestic economy?
ELVIRA NABIULLINA:
You know, the Bank of Russia is rather a goalkeeper protecting the economy against inflation. There were possibly many games where the final result depended on the reliability of the goalkeepers. There should always be someone who keeps the goal safe.
ALEXEY ZABOTKIN:
I can only recall the match between Russia and Spain in 2018. We won that match in a penalty shoot-out, and that was owing to the reliability of our goalkeeper.
QUESTION from Nezavisimaya Gazeta:
What indicator could the Central Bank present now to the public as proof of the effectiveness of its monetary policy?
Since achieving the 4% inflation target is now challenging, what is the Central Bank’s opinion about a new approach proposed by some experts to measuring inflation and taking it into account in its monetary policy, that is, not headline consumer inflation, but inflation adjusted for the factors, which have considerably changed the economic situation after 2022, specifically the factor associated with the special military operation with all possible consequences or the factor of tougher sanctions, etc.?
ELVIRA NABIULLINA:
As we know, truth corresponds to the facts. We should therefore analyse actual data, including with respect to annual inflation. The annual inflation rate halved over the past year. This was neither accidental nor a matter of chance. Just the opposite, as you can see, the circumstances were negative and proinflationary risks materialised. Lower inflation is the result of monetary policy in the first place.
Nevertheless, you are right saying that this effect is sometimes disputed. Possibly, some people tend to forget that the key rate translates into the economy with a time lag. They think that when the key rate is high, inflation is also high, while when we start cutting the key rate, inflation goes down as well. However, it takes from three to six quarters for the key rate to affect inflation. The fact that inflation has become relatively lower today is certainly the result of the high key rate that we maintained at 21% for a long time.
Indeed, we kept the key rate at 21% for a prolonged period, namely from October 2024 until last summer, and inflation started to slow down. In other words, the idea that inflation rises when the key rate is high is not tenable, in my opinion. When the key rate increased, inflation started to decelerate already in April after peaking last March. Having made sure that disinflation was sustainable, we began to cut the key rate.
What is important is that many experts really argue that we should not rely on headline inflation or measures of underlying inflation but should adjust this rate for all indicators that are growing and guide our monetary policy decisions by this adjusted inflation rate.
We calculate different inflation measures, including those adjusted for indexations of housing and utility tariffs, tourism services, etc., and use multiple indicators. We can adjust inflation for any possible factors, but this will not result in lower interest rates. If headline inflation is 10%, for example, and adjusted inflation is 2%, loan rates will not be at 2% – they will exceed 10% anyway. If we want more moderate interest rates, we need to decrease headline inflation. People do not care about particular factors pushing up inflation. It is headline inflation that affects the purchasing power of their savings and incomes. Of course, we could say that certain items have not become more expensive. However, other prices have risen. This is what is critical to consumers.
Therefore, we may calculate multiple adjusted indicators for analysis purposes, but it is a decline in headline inflation and price pressures that is the determinant.
ALEXEY ZABOTKIN:
Of course, monetary policy cannot affect the root causes of the supply-side inflation component, but it can bring demand dynamics in line with these circumstances, as a result of which inflation will decelerate and interest rates will drop.
QUESTION from Russia-24:
This week, the court has rejected Euroclear’s request to suspend the enforcement proceedings on the Central Bank’s claim. Does this mean that the recovery of the immobilised assets has become more likely?
ELVIRA NABIULLINA:
I can only repeat some general points in this regard because, as I have already said, we do not disclose our tactics or any details. We will take all possible measures and use all legal instruments to protect our lawful rights.
QUESTION from Expert:
Not so long ago, the Zabotkin trap was compared to the Volcker shock. As we all know, Paul Volcker, who chaired the US Fed in the 1970–1980s, was pursuing tight monetary policy, which ensured sustainably low inflation, on the one hand, but caused a recession, on the other hand.
I am intentionally not drawing parallels because the Central Bank’s arguments regarding a sectoral decline seem convincing and not everyone supports the opinion about a recession in the Russian economy.
My question is not about the current situation but rather about long-term implications. The Volcker shock in the USA was followed by Reaganomics, which is equally well known, i.e. lower taxes, deregulation, and a stronger dollar, driven in part by an inflow of foreign investors.
The Russian situation is different, to put it mildly, and we lack prerequisites for our own Reaganomics, so to speak. Recently, the Central Bank and the Government have frequently been urged to consolidate their efforts. Could such consolidated efforts produce necessary instruments and resources which would protect the economy from this shock and trap?
ELVIRA NABIULLINA:
This is a very good question. Firstly, I would like to stress that we do coordinate our efforts with the Government. Both the Bank of Russia and the Government seek to ensure sustainable long-term economic growth with low inflation and we are working on this issue within our respective mandates.
I would like to reiterate that if the Government needs to take measures creating additional government demand in a situation where the economy utilises all its resources, the Bank of Russia’s task is to make decisions in a way that would offset this.
Secondly, you are absolutely right with respect to the US economic history in the 1980s, and the economic developments both during and after the Volcker period are really an instructive example. In my opinion, the success of economic policy and the economic growth rate that the USA achieved in the early 1980s, from 1983 onwards, were largely due to the fact that the US Fed managed to break the inflationary spiral, acting without regard to indignant experts or leveraged companies. If you read information about that period, you will learn that leveraged companies were criticising the US Fed’s decisions. However, structured policy is essential, and taxation, antimonopoly measures, and a lower administrative burden are indeed part of policy.
Although circumstances and limitations are different, the Russian Government also makes decisions aiming to remove supply-side bottlenecks and promote competition. This is essential. In view of this, it is crucial to act in a coordinated manner.
ALEXEY ZABOTKIN:
As for the trap, it is for history to judge. Speaking of the Volcker shock, I would like to recall a few facts.
During tight monetary policy in 1980–1982, the USA really faced a decline in GDP, but it was not decreasing for three, let alone five straight years. Its reduction lasted for six out of twelve quarters, and they were not consecutive. Speaking of particular years, GDP dropped by 0.3% in 1980, rose by 2.5% in 1981, and then contracted by 1.8% in 1982. In other words, the growth rate of GDP over these three years was, on balance, actually positive, while inflation really decelerated from 15% to 4%. For this, the US Fed had to maintain its policy rate in the range of 15–20% for 18 months, but afterwards, beginning from 1983 onwards, inflation was 2.5–5%, while the policy rate ranged from 8% to 12%.
The most important thing is that, by the end of the 1980s, after that three-year pause, US GDP surged by 40% in real terms. This is approximately a 4% average annual growth rate, which is much higher than in 1974–1979 when monetary policy was accommodative and inflation was accelerating.
You have said that the Volcker shock was followed by Reaganomics. This is not exactly so. The first step was stabilising the macroeconomic situation and ending a vicious cycle of stagflation. That became the foundation for the successful implementation of all further structural transformations in taxation, regulation, and foreign trade. The list in this respect is indeed very long, and there are lengthy books on this topic.
One well-known
QUESTION from Moskovsky Komsomolets:
Cooling in the Russian economy has continued. Currently, the GDP growth rate is hovering around zero and unlikely to reach even 1% by the end of the year.
Simultaneously, staff shortages persist, while artificial intelligence, which was predicted to free up some labour resources, has had no effect on the situation so far.
That said, the banking sector, which is operating in similar conditions, has achieved rather good results. It has earned profits, while also working under the pressure of sanctions and in the same economic conditions. Could you give any specific recommendations to the Government that would help it quickly improve the GDP growth rate, taking into account your knowledge and experience that enable you to manage the banking sector efficiently?
ELVIRA NABIULLINA:
I would like to remind you that our mandates differ. Both the Bank of Russia and the Government seek to ensure and boost sustainable economic growth rates. Nobody wants to see just a short-term spike in growth rates and their subsequent decline.
I firmly believe that the main thing that can enhance sustainable economic growth rates, which I have already mentioned many times, is an increase in labour productivity. We are lagging behind in this respect. Labour productivity is not rising sufficiently fast. Considering that the economy is utilising all the resources available, primarily labour resources, improving labour productivity is the key and should be the main focus of policy, in my opinion.
Monetary policy, which creates prerequisites for price stability and moderate interest rates, is able to support the endeavours to enhance labour productivity. I believe that this is the right recipe. There are no easy solutions, such as cheap credit, that would promote sustainable economic growth rates. This is impossible and is simply populism.
QUESTION from Dengi Ne Spyat project:
The Russian securities market has been declining for 15 weeks already. As we remember, VEB.RF supported the domestic market in 2000 and allocated resources from the National Wealth Fund in 2022 to prop up the market.
Currently, prices for many shares have dropped to their record lows. By the way, today’s key rate decision has also provoked a certain correction in the equity and debt markets.
Are the authorities considering any measures similar to those implemented in 2008 and 2022 that would support the Russian market and potentially double or triple its capitalisation in the future?
ELVIRA NABIULLINA:
The authorities did allocate funds in 2008 and 2022 to support the securities market, but it is essential to understand the reasons. Those were urgent measures to support financial stability in general during that market slump.
I should say that such government interventions are rare overall, even in foreign countries. The situation was totally different, in my opinion. Indeed, market volatility is significant, but it still cannot be considered extraordinary, and accordingly, there are no grounds for any interventions in the form of asset purchases.
Generally, one should understand that fluctuations in the equity market are inevitable. These trends should be assessed over a long horizon. However, if someone believes that shares are currently undervalued and should therefore be propped up, this is probably a reason to buy them.
ALEXEY ZABOTKIN:
In 2022, there was indeed such a decision, but in practice, there were no equity purchases.
QUESTION from PRO.FINANSY project:
We already see that many banks have reduced deposit rates to about 10%. Concurrently, interest rates on loans and mortgages remain significantly higher. How would you explain the reasons for such a gap? What level of the key rate is needed for banks to decrease loan rates at the system level?
ELVIRA NABIULLINA:
Firstly, I would like to stress that this is a normal trend and deposit rates always decline slightly faster than loan rates. This is natural when monetary policy is eased.
As regards the level of the key rate needed for banks to decrease loan rates at the system level, this is already happening, e.g. in mortgage lending. Notably, its share in total disbursements has increased after the tightening of the Family Mortgage programme terms. Both the proportion and amounts of mortgages have been growing. Just like the key rate, interest rates on mortgages have also dropped by 6–7 pp. Over the first five months, market-based mortgages surged by a factor of 3.5 year on year.
As for corporate loans, they are often issued at variable interest rates, which means that the key rate reduction automatically translates into these loan rates, thus ultimately decreasing loan servicing costs for companies.
However, speaking of corporate lending, the dynamics are mixed. We know that interest rates in this segment differ and there is a high proportion of subsidised loans, project finance loans, and loans on special terms. Therefore, even average corporate rates, including both market-based and subsidised ones, were not too high last year either. They have been declining more slowly in general because the subsidised rate has remained the same.
Nevertheless, there is a very good integral indicator showing that borrowing costs for companies have decreased. Look at corporate bond yields – they have dropped by 6 pp as well. This is a system-level reduction in market rates following the key rate. The proportion and the pace of the decrease vary across deposit and loan segments, but the downward trend does exist.
QUESTION from Frank Media:
This week, JP Morgan sold its stake in Sberbank. Did the Bank of Russia give its consent to this transaction? Is it not weakening your negotiating power in the discussion about a possible exchange of immobilised assets?
And the second question, partly associated with an earlier one: is it possible that you will decide to serve your third term?
ELVIRA NABIULLINA:
The answer to the latter is simple: I am serving my third term now.
As for your first question, you are talking about a transaction conducted in a foreign jurisdiction. We have no information about such transactions.
Speaking of a possible market overhang, those Russian securities that are sold from abroad to Russia and whose ownership structure comprises investors from unfriendly states are subject to separate accounting. Such transactions require a permit.
If a depository breaches the requirements for separate accounting, including by recording such securities in trading accounts, we can hold it liable for this. There were cases when we not only penalised the violators, but also revoked their licences. We communicate the related information to the law enforcement authorities. Hence, we see no risk of an overhang here, since this is a regulated process.
QUESTION from Vedomosti:
This year, the Government is discussing an adjustment of the fiscal rule, while business representatives at the Saint Petersburg International Economic Forum suggested denominating the fiscal rule in rubles. What do you think about this idea? What are potential effects of such a decision? Would it enable a faster key rate reduction, for example?
And question two, please. The Ministry of Construction proposed introducing a gradual release of the funds in escrow accounts. What is your opinion about that?
ELVIRA NABIULLINA:
As for a gradual release of escrow accounts, we are totally against this idea. When a household takes possession of an apartment, the escrow account must be released. I believe that this is a fundamental principle we need to adhere to.
Notably, it is obvious that the entire system of escrow accounts and project finance is stabilising the situation in the housing market.
As regards the fiscal rule, leaving only one part of the fiscal rule would mean removing a substantial stabilising component of the rule, namely its indirect effect of stabilising the exchange rate, in our opinion.
I think that this would force us to consider this risk as more significant rather than create additional room to cut the key rate. It could even make us tighten monetary policy, if it happens, while I am hoping that it will not.
ALEXEY ZABOTKIN:
We have just seen what might happen when the Government decides not to conduct foreign exchange interventions provided for by the fiscal rule. I am talking about the exchange rate being more volatile in March, April, and May than many were hoping for, as it was fluctuating both upwards and downwards. This is clear evidence of what might happen if the Government decides to cancel the exchange rate component.
QUESTION from Anna Finance project:
My question is very practical but critical to multi-child families. When multi-child families decide to use their government subsidy of ₽450,000 for early mortgage repayment, banks only reduce the amount of the payment, that is, they refuse to shorten the loan maturity, which would be more advantageous for households mathematically, in terms of total interest and fees payable.
Could the Central Bank oblige such commercial banks to offer both options to these families, for them to decide on their own whether to decrease the loan principal or only the payment, as it normally happens when a borrower decides to partly repay a loan ahead of schedule?
ELVIRA NABIULLINA:
In terms of regulation, if a family wants to repay a mortgage in advance, the source of funds used for this, whether it is the household’s own money or a government subsidy of whatever form, is a mere detail. This is stipulated when the borrower and lender sign an agreement establishing the early repayment procedure and its principles.
The Bank of Russia does not intervene in banks’ contractual practices. However, we will additionally analyse whether this is a case of abusive practices or a lack of information when a borrower signs an agreement. This might be associated with borrowers failing to understand whether they can or must have both alternatives when they sign agreements with banks. We will explore the situation.
QUESTION from Rossiyskaya Gazeta:
My question is about cash. Large banks report a higher share of cash payments, and many are concerned about this. What is the Central Bank’s opinion about that? Does this have any effect on deposit rates declining recently?
ELVIRA NABIULLINA:
The main reason for declining deposit rates is our monetary policy, including lower inflation and key rate cuts. Indeed, the demand for cash has risen, as we can see. There might be several reasons for that, including adaptation to the tax changes, problems with cashless payments, etc., while it would be rather hard to separate one from another.
In macroeconomic terms, the proportion of cash in money supply has indeed increased, but only slightly.
In terms of its impact on monetary policy, the demand for cash has no direct effect on inflation or monetary policy. Cash withdrawals from bank accounts only change the form of money, while the overall amount of money supply in the economy stays the same. Therefore, the purchasing power of households’ funds remains unchanged, and the demand for goods and services does not expand.
ALEXEY ZABOTKIN:
Our monthly analytical commentary Monetary Conditions and Monetary Transmission contains a special chart with the path reflecting year-to-date cash dynamics. Indeed, the growth rate of cash in circulation this year has been more significant than in 2024–2025, but approximately the same as in 2023, that is, this increase is not anything particularly noteworthy.
ELVIRA NABIULLINA:
The proportion of cash in circulation has risen by no more than 0.5 pp, as far as I remember.
ALEXEY ZABOTKIN:
This is true; the proportion of cash in M2 (money supply according to the national definition) has edged up from 14.0% to 14.4%, which is close to historical lows. In other words, we do not observe any unusual fundamental change in any metrics.
ELVIRA NABIULLINA:
Thank you for your attention.