In a recent plenary session at the State Duma, Elvira Nabiullina, the head of the Bank of Russia, addressed key issues surrounding monetary policy and economic development. She began by expressing gratitude to the deputies for their efforts in preparing the Monetary Policy Guidelines. "There is a strong alignment between the Bank of Russia and the Government," she stated, emphasizing that monetary policy should be aligned with governmental efforts aimed at economic development.
Nabiullina highlighted two major concerns from discussions with deputies: the high key rate's impact on economic growth and rising inflation affecting consumer prices. She argued against viewing these as conflicting priorities, asserting that "price control is essential for sustainable economic growth."
The speech also touched upon rapid demand growth since 2022, driven by credit and fiscal stimulus, which has resulted in uneven industrial growth. Despite some comparisons to past financial cycles in 2014-2015 and 2022, Nabiullina noted that current conditions are different due to unprecedented production capacity utilization and low unemployment rates.
Addressing concerns about costly credit hindering business development, she pointed out that systemic macroeconomic decisions cannot rely solely on specific examples but must consider broader data trends. The Bank of Russia uses surveys from thousands of businesses to inform its decisions.
Investment trends were another focal point; Nabiullina reported record investment growth over three years in various sectors like mining and agriculture. While acknowledging warnings about unaffordable credit potentially stifling investment, she countered that some industries would continue growing despite high costs.
Labour productivity was noted as improving across most industries due to increased demand incentivizing automation. Corporate profits remain robust, providing significant resources for future investments.
On lending trends, household loans have shown signs of slowing down while corporate loans continue at a steady pace. Nabiullina emphasized that a higher key rate is necessary to moderate overall lending growth and prevent excessive corporate debt accumulation.
She also addressed misconceptions about interest rates driving up prices: "The key rate works as an efficient anti-inflation instrument." According to her forecast, inflation could drop to 4.5–5% next year with potential reductions in the key rate if no external shocks occur.
Nabiullina concluded by advocating for continued support from State Duma deputies in maintaining price stability as outlined in Russian law: "I count on your support for our willingness to address the task set out."