/ world today news/ Elvira Nabiulina’s press conferences each time become a greater and greater mockery of both common sense and the citizens of Russia. On Friday, the Bank of Russia decided to raise the key interest rate by a full percentage point to 9.5%. This decision raised no questions. Elvira Nabiulina’s speech came as a bigger surprise. We thought that the director of the Central Bank could surprise us with a little, but now she succeeded.
The present material will be built on the most disgusting statements of Nabiulina. And we will accompany them with a comment.
“Despite our expectations, today there was no break in the dynamics of inflation. In addition, its sustainable components have even increased. The main reason is the growing imbalances in the economy. As a result, a tighter monetary policy is needed than previously thought. “
If the Central Bank conducts a policy of increasing the main interest rate, this policy does not give results, something must be done accordingly. For example, to use other methods. More effective. But Nabiulina said that there is no break in inflation, which means that monetary and credit policy should be made even stricter. Where is the logic?
“I start with the economy, which not only compensated for the losses, but also significantly exceeded the trajectory of balanced growth… These are impressive results, if it were not for one “but” – high inflation. It is wrong to consider the observed rates of economic growth in the current conditions as sustainable and balanced. High inflation is an indicator of increasing overheating of the economy”.
Is it? The high indication is an indicator not of overheating of the economy, but of the situation on world markets. On the contrary, our economy is still far from its potential (stable growth of at least 4-5%). With a competent monetary and credit and budget policy, it is quite possible to achieve these figures.
But, what is more frightening, Nabiulina, judging by her words, is ready to slow down the rate of economic growth in order to bring inflation “to normal”. She herself says that the economy is growing well. This is indeed so. And for this, the government of Mishustin and Belousov has outstanding credit. At first glance, the economy should be supported. But not. Nabiulina considers her height to be unbalanced, so she needs to slow down.
“The overheating of the economy is a consequence of the growing imbalance between supply and demand. Many have noticed how prices have soared in the housing, motoring and domestic tourism markets recently. These markets are the clearest examples of what growth in demand can lead to in excess of capacity to expand supply.”
In order for there to be no imbalance between demand and supply, supply must be expanded, not demand slowed down. If the demand is pressed, there cannot be any increase in the production of goods and services. On the contrary, money should be given to businesses to start producing more goods and services.
As for Nabiulina’s examples, they are complete nonsense. Housing has become more expensive not because people suddenly have more money, but because building materials have become more expensive. Cars have jumped, not because demand has skyrocketed, but because there are problems with microchips being imported from abroad. Domestic tourism is growing as external restrictions continue to apply.
But if demand shrinks, companies will have no incentive to speed up the recent supply of parts, and tourism businesses will have no incentive to build new infrastructure. Isn’t that obvious?
“In these conditions, the distribution of cheap credits cannot quickly expand production, but will continue to fuel demand”.
No one is forcing her to give out consumer credits. From this, indeed, the supply is unlikely to expand greatly. Demand is the stimulus for expanding supply, but it is not the determining factor. Instead of consumer lending, money should flow into the real sector of the economy. In this case, increasing the offer is quite possible. But the Central Bank stubbornly refuses to “give out” loans. Nabiulina’s office believes that the banks will cope. Yeah right.
“There was even an opinion that the increase in the main interest rate did not in any way restrain the growth of prices. In fact, if we hadn’t started raising rates last spring, inflation would be well over 10% today. Our interest rates prevented that”.
And why not immediately above 20%. Get and provide accurate accounts: what share of inflation is imported, and what is purely domestically driven.
“Can we achieve 4% inflation by the end of the year? Not without a recession”
In general, Nabiulina said what they expected from her for a very long time. Low inflation is not a guarantee for economic growth. And in some cases (like now) it is even able to reduce the growth rate. If we have inflation of 4%, then in the economy in general, according to Nabiulina herself, a recession will begin.
And here a legitimate question arises. Should we continue to accept inflation as the main indicator of the socio-economic development of the country? Let’s remember the beginning of the century. Back then, inflation rarely fell below 10%. But the economy also grew with growth of 608%. And the citizens didn’t care at all about inflation.
Translation: V. Sergeev
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