/ world today news/ The Chairman of the Central Bank of Russia, Elvira Nabiulina, has been claiming for seven years now that the main task of the Central Bank is to fight inflation.
Before 2020, she, let’s face it, successfully coped with it. Over the course of several years, inflation has fluctuated around 3-4.5%.
Indeed, for this “achievement” the economy and the growth of the population’s income paid a heavy price. Virtually all economic activity has dried up. The economy did not receive an engine for growth, but a brake. Economic processes slowed down due to the lack of liquidity. And in connection with this, the logical question arises: is low inflation necessary at all, if the economy and the incomes of citizens grow at a minimal speed.
Even if we remember the experience of the “zero years”, then inflation rarely falls below 10%. On the other hand, the real incomes of citizens are growing rapidly (over 10% per year), and the economy also shows high rates of growth (7-8%).
Of course, we should not idealize the “zero” years. Undoubtedly, things could have been done back then somewhere better than what has been achieved. But statesmen headed by the president solve the task of how to acquire political and geopolitical sovereignty. Anyway, if we look at the dry numbers, we will see that inflation is a secondary parameter.
When there is rapid economic growth, inflation is inevitable. This is a natural process, the artificial limitation of which can lead to a slowdown in the economy and the growth of citizens’ incomes. Of course, this does not mean that the situation should be spurred on. Inflation must be under control, not a target but a limit must be established (roughly speaking 7%). And the established goal of the Central Bank of 4% is inadequate, because Russia is a country with a developing economy, with the rapid growth of which inflation will inevitably go beyond such a low goal.
In 2021, with Nabiulina, perhaps for the first time, cognitive dissonance appeared. She was taught that when inflation rises, the main interest rate must necessarily rise. Which, by the way, the Central Bank has been doing since March of this year. Another issue is that there is no benefit from these actions, because inflation is not monetary in nature, but imported. But if the textbooks say that it should be raised, then the Central Bank will raise it.
But that’s not even the point. For several months now, Nabiulina has said that both the Federal Reserve and the European Central Bank will soon also start raising the key interest rate to fight inflation. Indeed, in the US the annual price growth is already 5.4%, and in the Eurozone – 3.4, which is abnormal for both the US and Europe.
But neither the Federal Reserve nor the ECB do that. In addition, the Federal Reserve announced a few days ago that inflation will have a long-term nature. Federal Reserve Bank of Atlanta Director Raphael Bostick said something similar. In effect, he voiced what, for obvious reasons, could not be said by Jerome Powell.
Such a thing means that the Federal Reserve does not define reducing inflation as a primary objective. In general, the American regulator is concerned with what price growth will be if the other goals are not reached – maintaining the recovery and further growth of the economy and achieving a certain level of employment. Until these targets are met, the Federal Reserve will not lower the key interest rate. Because it is directly established in its statute that the regulator is responsible for economic growth and the level of well-being of citizens.
By the way, in the monetary and credit policy of the Federal Reserve there is a huge amount of problems and illogical actions related to the struggle between American globalists (liberals) and conservatives (statesmen). We write about this all the time, but now the topic is different.
What conclusion should the Central Bank of the Russian Federation draw about this? Obvious. It is necessary to give up monetary policy, stop considering the main interest rate as a tool to fight against inflation, increase investment lending to enterprises, call on the government to strengthen protectionist measures and protect the domestic market from importing inflation.
Will we see any of the above? Of course not . Nabiulina will follow her line to the end. Because that’s what she learned from the liberal economics textbooks of the 1990s.
Translation: V. Sergeev
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