Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 24 July 2026
Good afternoon. Today, we have made the decision to cut the key rate to 14% per annum.
We consider the observed acceleration of price growth to be temporary. We still assess underlying measures of inflation in the range of 4.0–5.0%. Businesses’ expectations about demand declined in June, as is evident from high-frequency data. This might suggest more moderate demand in the future, which will limit the opportunities for companies to pass through higher costs to prices. We have taken into account July’s surge in households’ inflation expectations in response to the developments in the fuel market, which might trigger second-round effects on inflation. In view of this and a more expansionary fiscal policy stance, we need to ease our monetary policy more smoothly. Accordingly, we have revised the key rate path for 2026 and 2027 upwards.
I would now dwell on the rationale for our today’s decision.
Firstly, inflation.
Price growth accelerated in June, which was largely provoked by the situation in the fuel market, as well as growth in fruit and vegetable prices after their sharper-than-usual decline in spring.
High-frequency data suggest that increased fuel prices have begun to feed into prices across a broad range of goods and services. This has expectedly translated into inflation expectations surging in July. Petrol is a salient item accounting for a significant portion in households’ regular purchases and companies’ costs.
As the situation in the fuel market stabilises, inflation expectations are likely to go down. They demonstrated similar dynamics in response to higher VAT, adjusting downwards rather soon after their short-term spike. We have not changed our estimate of underlying inflation and assume that it will stay close to the current level in 2026 2H.
Given the realised rise in fuel prices and the subsequent increase in prices for other goods, we have revised our inflation forecast for this year upwards to 6.0–7.0%. After the effects of transitory factors wane and as a result of the monetary policy pursued, inflation will return to 4% in 2027 and stabilise at the target further on.
Secondly, the economy.
As we expected, GDP demonstrated positive dynamics in 2026 H1. After its decline in 2026 Q1, which was associated with calendar and weather effects, economic activity expanded moderately in 2026 Q2. These assessments rely on industrial production data for June.
Corporate investment was recovering. Growth in household consumption sped up somewhat, which was partially attributable to one-off factors, including pent-up demand from the beginning of the year when consumption was subdued.
Further developments in the economy depend on a number of factors. The first one is the level of goods supply. In our baseline scenario, we assume that companies will restore their production capacities before the end of this year. The second factor is demand dynamics. Businesses expect demand growth to slow down, as is evident from high-frequency data.
Given the temporary reduction in production capacities in the economy, we have revised our GDP forecast downwards. GDP will expand by up to 1.0%, according to our estimate. The forecast for the next few years has remained unchanged.
A gradual easing in the labour market will contribute to a slowdown in price growth. According to the Bank of Russia’s regional branches, companies report an increase in staffing levels, primarily where labour mobility is higher.
Thirdly, we assess monetary conditions as moderately tight.
Money market rates and federal government bond yields have risen. However, taking higher inflation expectations into account, the tightness of monetary conditions in real terms has decreased somewhat.
Households’ saving activity has slightly weakened, with its structure changing. Although deposits continue to grow, their proportion has been declining gradually. Contrastingly, the share of funds invested in financial market instruments and real estate has been expanding steadily.
The increase in corporate lending decelerated in June. The retail segment recorded a rebound, driven by both mortgages and unsecured consumer loans.
Generally, lending dynamics are currently consistent with our forecast, while money supply growth has rather exceeded it so far. As you know, money supply has two main sources, which are lending and the budget balance. The fiscal system’s actual expenditures are now running considerably higher than in previous years. Accordingly, the overall dynamics of budget spending will likely be higher this year, and therefore, the structural deficit will be larger than assumed in the current projections. This means that, all else being equal, monetary policy should ensure a more moderate rise in lending compared to the growth rates observed in 2026 Q2.
As for the medium-term horizon, the Government has not announced fiscal policy parameters yet. Nevertheless, it is already known that the primary structural deficit is most likely to persist through 2028, due to which our macroeconomic forecast may not rely on a zero budget balance. The Government continues discussing fiscal policy parameters for the next three years. The fiscal policy stance is one of key assumptions for us, and therefore, we have updated our forecast taking into consideration our own estimate of the future path of the federal budget returning to a balanced structure. The revised key rate path reflects this estimate.
Now, I would like to speak of external conditions.
Inflation has continued to accelerate worldwide, including due to the events in the Middle East, forcing many foreign central banks to shift towards monetary policy tightening.
Global crude prices remain volatile, demonstrating a strong response to geopolitical developments. The unfolding situation shows that, if the Middle East conflict ends, the premium for geopolitical uncertainty is likely to be excluded from crude prices rather soon. As a result, the latter will return to levels which are fundamentally justified in terms of the balance in the global oil market.
Taking these factors into account, we have decreased our forecast of crude prices by $5 per barrel over the entire forecast horizon. I would like to reiterate that the crude price affects the parameters of our forecast only to a limited extent since the fiscal rule smooths the impact of its fluctuations on the economy.
The balance of foreign trade in 2026 Q2 was below our expectations, which was associated with lower exports and higher imports, including due to a stronger ruble.
I will now speak of risks.
Overall, proinflationary risks prevail over the forecast horizon, according to our estimate. As before, they include a slower-than-expected easing in the labour market. Budget parameters remain a major factor of uncertainty, as I have already said. We expect the Government to officially announce them in September, after which we will update our forecast.
New risks are largely associated with the reduction in production capacities in certain industries. If supply constraints persist for longer than assumed in our baseline scenario, this may accelerate inflation, including through the response of inflation expectations and second-round effects.
On the other hand, the temporary contraction in production capacities might have disinflationary effects as well. If business sentiment and consumer confidence decline notably due to this factor, aggregate demand dynamics will be much more moderate.
Winding up, I would like to comment on our future decisions.
Considering new inputs regarding budget parameters and possible second-round effects from the earlier rise in prices, the key rate path should be higher. We have increased its range to
Thank you for your attention.
Q&A for the Media
QUESTION from TASS:
Did the Board of Directors discuss raising the key rate today? Does the reduction indicate that, in the Bank of Russia’s view, the situation in the fuel market is normalising?
ELVIRA NABIULLINA:
We substantively considered two options: keeping the key rate on hold and cutting it by 0.25 percentage points. Additionally, there were a few opinions in favour of a key rate increase. Nonetheless, we actually focused on two options.
We did analyse how the situation in the fuel market had been unfolding. The developments are primarily related to supply shocks. A monetary policy response to supply shocks is only needed when they generate pronounced second-round effects that feed into underlying inflation. Whether such effects emerge certainly depends on how long these shocks persist.
We can see that the Government has been taking measures to stabilise the situation in the fuel market. Additionally, we listened attentively to the related reports from the Bank of Russia’s regional branches. The situation varies across the Russian regions, but it is stabilising in many of them, according to our branches.
Our baseline scenario assumes that production capacity will restore gradually by the end of the year.
QUESTION from RIA Novosti:
How does the Bank of Russia assess the sanctions recently reimposed by the European Union? Will they affect the banking sector?
Business representatives recently suggested raising the inflation target. Is the Bank of Russia ready to consider this suggestion?
ELVIRA NABIULLINA:
The Russian banking sector has now been operating under sanctions for several years, with a large number of banks affected. Non-sanctioned banks are generally prepared for such developments. We believe that all banks will be able to adapt, as they did when foreign countries imposed earlier packages of sanctions. The banking sector has accumulated a substantial safety cushion and capital. Therefore, we do not see any serious problems in this regard.
As for changing the target, we believe that we can only discuss its reduction in the future. We do not consider its increase as, in our view, it would ultimately leave everyone worse off. The notion that interest rates would drop as a result is an illusion. If we raise the target, interest rates, market rates will only go up. This is not good for the economy, in our opinion.
Moreover, a possible revision of the target because it has not been attained would just undermine confidence in the inflation targeting regime and monetary policy. Of course, this is a risk we cannot take.
QUESTION from Izvestia:
How does the regulator assess external factors, including the re-escalation of the Middle East conflict, when preparing its key rate decisions? How do these factors impact your forecasts?
ELVIRA NABIULLINA:
Indeed, we consider external conditions among major factors influencing our decision.
Disruptions to shipping affect inflation in Russia through several channels. On the one hand, higher global energy commodity prices drive up foreign currency export earnings and strengthen the ruble, which is a disinflationary factor.
On the other hand, the longer supply disruptions through the Strait of Hormuz persist, the greater the risk that higher prices for Russia’s imports will accelerate inflation.
Of course, the duration of the conflict remains a factor of uncertainty, but I should say that we now give less weight to it than we did, for instance, three months ago.
ALEXEY ZABOTKIN:
It is now absolutely clear that the disruptions in supplies from the Middle East have been affecting the world economy. Indeed, a number of leading central banks either have started to raise their policy rates or are considering such a move in the near future.
QUESTION from Bankiros.ru, Nizhny Novgorod:
The Central Bank has stated several times that the situation in the fuel market might influence inflation and, consequently, key rate decisions. The ruble exchange rate is linked to these factors. How then will higher petrol prices affect the exchange rate of the national currency? Does the Bank of Russia see any risks to the stability of the ruble?
ELVIRA NABIULLINA:
There is no direct relationship between petrol prices and the exchange rate. Indeed, businesses have expanded imports temporarily, which might slightly increase the demand for foreign currency. Nevertheless, in terms of total foreign trade turnover, the amount of such transactions is quite small so far and, accordingly, they will only have a minor effect on the exchange rate.
QUESTION from Bitkogan project:
If the contraction of production capacity in certain industries mentioned in the press release remains that severe until the end of the year, for example, will the Bank of Russia consider raising the key rate?
ELVIRA NABIULLINA:
We will analyse how the situation will be unfolding in general. The contraction of production capacity is certainly a critical factor, but not the only one influencing our key rate decisions.
We will assess all factors together. However, all else being equal, this will certainly reduce room for cutting the key rate.
QUESTION from Igor Shimko media project:
You said in October 2025 that, if inflation did not slow to the target, forcing the Bank of Russia to raise the key rate, you would have to take tougher measures and, accordingly, increase the key rate more sharply. Should we understand this as a potential increase to above the previous level of 21% and has anything changed since then?
ELVIRA NABIULLINA:
Our updated forecast (we have revised the forecast today) assumes that monetary conditions are now sufficiently restrictive to slow down inflation.
As you know, the policy we pursue has helped decelerate underlying inflation from double-digit levels to 4–5%, which is more than two times lower in annualised terms.
We cannot completely rule out the possibility of a key rate increase, as we have consistently reiterated. We will choose such a policy stance that will be needed to return to low inflation. If circumstances change suddenly, forcing us to raise the key rate, we stand ready to increase it to the level needed. I hope that our actions in 2014, 2022, and 2023–2024 leave no doubt about that.
Nevertheless, this would represent a completely different scenario, compared to our current baseline, with additional persistent supply shocks which would cause a protracted rather than temporary reduction in the country’s production capacity. Consequently, if Russia’s production capacity decreases persistently, this will require more moderate demand in the economy in both 2026 and 2027.
However, I would like to reiterate that this is not what is assumed in our baseline scenario. We do not believe it reasonable to factor in such developments at this stage and raise the key rate proactively. If such a scenario materialises, we will do what is necessary to ensure price stability.
QUESTION from Kommersant:
My question is about the budget-related factor. Judging by the press release, you have not received any additional information about fiscal policy parameters since the previous meeting, as you give the same assumptions about the expansionary impact of budget spending and about the structural budget deficit.
However, the Ministry of Finance has definitely revised the budget for 2026, although not publicly this time, that is, without the Parliament. I assume that you have been actively discussing the budget projections for 2027 as well. Will you really make all decisions related to this factor only in October, after all these parameters have been officially disclosed?
ELVIRA NABIULLINA:
Let me explain. Our previous forecast assumed a zero budget balance, as was officially announced in the budget parameters. However, the Ministry of Finance has already stated that a zero balance is unlikely to be achieved before the end of 2028. Accordingly, we may not include a zero budget balance in our forecast. Hence, this time, we have made our own estimate of a possible trajectory of the structural primary budget balance.
The actual trajectory may be different, which, as we know, the Ministry of Finance and the Government are currently discussing and will later announce officially, but most likely in September or even at the end of September.
However, given that actual spending this year is much higher than was initially planned, we assume that the structural primary deficit will be 2% of GDP in 2026, 1% of GDP in 2027, and 0.5% of GDP in 2028.
I would like to reiterate that these figures are our estimates, and we will adjust them after the Government presents its updated forecast. Nevertheless, this is the trajectory that our baseline scenario assumes at the moment.
QUESTION from LawAndFinance:
My question is also about the budget deficit. It has turned out to be rather large, as you mentioned, and recently a number of government bond auctions failed to take place on terms acceptable to the Ministry of Finance. If the Ministry of Finance is unable to borrow in the market at acceptable interest rates, where will it ultimately obtain the funds needed to cover the deficit? Which of the possible options for covering the deficit poses the highest risk to inflation and household savings?
Is it possible that the Bank of Russia might need to reduce the key rate not because of a sustainable deceleration of inflation but because government debt servicing costs have become too high? How far is Russia from this scenario today?
ELVIRA NABIULLINA:
The tactics used to finance the budget deficit fall within the Government’s remit. However, recent experience shows that the Ministry of Finance acts flexibly when implementing its borrowing policy and chooses its borrowing policy tactics.
The impact of the budget on inflation primarily depends on the size of the deficit rather than on how it is financed. Of course, since we factor in the budget in terms of its consolidation parameters, we need to receive information about the budget reduction trajectory as early as possible. A decrease in the budget deficit is really a disinflationary factor.
As regards government debt servicing costs and their possible growth, we do not think that such a situation might occur because government debt in Russia is quite small. This is one of the reasons why it is essential to control government debt and avoid its build-up. A moderate debt burden is a crucial element of responsible financial policy for any borrower, be it the government, a business, or a household.
The experience of other countries with really high levels of government debt shows that they might face a problem of limited flexibility in their macroeconomic policies.
ALEXEY ZABOTKIN:
A long time has passed since the 1990s, but at the end of the 1990s, Russia was in such a situation as well, which seriously affected macroeconomic stability in 1998.
QUESTION from InvestFuture project:
The equity market has recently declined quite sharply, which has hurt private investors. Is this an indicator of a recession and has the recent market downturn any effect on your key rate decisions? How severe should the decline in the market be to signal financial instability?
ELVIRA NABIULLINA:
We closely monitor the developments in the securities market, which is facing quite hard times. Nevertheless, it does not have any significant direct effect on inflation, and therefore, we did not consider it as a factor influencing our decisions.
We see no reason for concern about financial stability in general. Indeed, the securities market is now volatile, but I think that the problems are largely attributable to the increased uncertainty regarding future financial performance of issuers and their future dividend policies. However, we do not consider it necessary to somehow respond to risks associated with financial stability. We just do not see such risks now.
Today’s circumstances and market dynamics are completely different from those of earlier periods when we took additional response measures.
QUESTION from Dengi Ne Spyat project:
Companies have reduced their investment expenditure by around 14% year on year, as we can see. Additionally, the Government’s objective is to start a new investment cycle by 2027. However, even with the decreased key rate, which is now 14%, many companies still find it expensive and troublesome to continue their investment programmes. We can see that many public issuers are scaling down their investment programmes. Accordingly, my question is as follows. How does the Central Bank assess the current conditions? What level of the key rate would allow the economy to start a new investment cycle?
ELVIRA NABIULLINA:
Indeed, investment activity is moderate, although as we have said, it slightly revived in 2026 Q2 compared to 2026 Q1, in our view. However, it would be incorrect to attribute everything to the key rate.
Firstly, companies’ willingness and readiness to invest depend not only on the interest rate on borrowings raised for investment purposes. The main source of investment in both Russia and many foreign countries has always been companies’ equity.
In addition to financial resources available for investment, companies also need incentives to invest and should understand and be able to predict their growth and development prospects.
Nevertheless, we expect investment to increase next year. Actually, the slowdown in investment growth does not mean that investment in the country has stopped. The amount of investment remains very high, exceeding ₽42 trillion.
Compared to 2021, for example, when this amount was ₽21 trillion, as far as I remember, and adjusted for inflation, investment has increased by a quarter. We have reached quite a high level of investment, which also supports the development of production capacity.
Additionally, we can see that credit to companies is also expanding. Corporate lending increased overall in 2026 H1. A fairly large proportion of these loans are long-term, meaning that companies may invest these funds if needed.
QUESTION from Interfax:
Did the Board of Directors consider attacks on warehouses today? Do you think that this might aggravate the supply shock? Do you see any additional proinflationary risks in this regard?
One more question, if I may. This is the second time the Central Bank’s decision differs from what was expected by the market. Do you consider this critical or not, given that the adjustment was only 25 basis points?
ELVIRA NABIULLINA:
As for your first question, this is indeed about supply shocks. Speaking of their impact on inflation, current price growth may accelerate due to these supply shocks. Nevertheless, what is critical to us is whether these supply shocks push up underlying inflation measures or not, that is, whether they have such second-round effects that would force us to take monetary policy response measures. Not every supply shock requires policy action. If a supply shock is transitory and its effects fade over time, no monetary policy adjustments are needed.
Therefore, underlying inflation measures are critical to us. As I have already said, underlying inflation stays within the range of 4–5%, as we assessed earlier.
As regards your second question, indeed, most analysts expected the key rate to remain unchanged. Nevertheless, there were also those who predicted its possible reduction.
We prepare our own assessment of the situation and have revised our baseline forecast. It shows that we do see room for further monetary policy easing, although at a slower pace than expected before.
ALEXEY ZABOTKIN:
Another important point about the situation with production capacity. To avoid long-lasting effects, we need to build on the assumption that this reduction in production capacity, production potential is temporary, that is, companies will be able to restore their facilities in the near future.
Overall, our baseline forecast assumes that the damaged production facilities will be restored for the most part by the end of the year.
ELVIRA NABIULLINA:
There is yet another reason why we believe that second-round effects will be limited. Second-round effects occur when costs can feed through to prices across a wide range of goods. However, when demand is moderate, especially taking into account our business monitoring data showing a decrease in enterprises’ demand estimates, the opportunities to pass through higher costs to prices are certainly limited.
Nonetheless, inflation expectations have still increased. We will monitor to what extent this might push up demand.
ALEXEY ZABOTKIN:
And how quickly inflation expectations will go down.
ELVIRA NABIULLINA:
This is true, and I have already given some examples. At the beginning of the year, after the VAT increase, inflation expectations were expectedly rising. However, they started to adjust downwards rather soon.
Currently, inflation expectations have naturally increased as well. This growth was unavoidable. What is important is how inflation expectations and the situation in general will be changing in the future.
QUESTION from RBC:
How does the Bank of Russia assess the effect of the attacks on warehouses on the insurance sector, particularly in terms of deteriorating conditions and higher loss ratios in transport and property insurance? Do you see any risks in this regard? Does this sector have a sufficient safety cushion? Is the Central Bank discussing any possible measures to support insurers and Russian National Reinsurance Company (RNRC) in particular?
ELVIRA NABIULLINA:
No, we are not discussing any support measures because, in our opinion, the insurance sector generally has a sufficient safety cushion. Insurance companies provide insurance services, while RNRC offers reinsurance protection for property losses that might be caused by terrorist acts and drone attacks. Risks are thus shifted from primary insurers to RNRC.
Granted, insurance payments have increased, but insurers and RNRC have sufficient resources to make these payments while staying financially resilient. As I have said, insurers’ capital cushion is currently large enough.
QUESTION from Rossiyskaya Gazeta, Vladivostok:
We have opted for low inflation, sacrificing economic growth. We ended up with high inflation and close-to-zero economic growth. Is it perhaps time to implement broader administrative measures that would partly contain inflation and encourage economic growth to some extent?
ELVIRA NABIULLINA:
I would disagree with the wording of your question because nobody has been sacrificing economic growth. Today, economic growth rates are determined by available physical resources, primarily workforce, and labour productivity. Whether inflation will be low or high in these conditions depends on monetary policy. Monetary policy ensures price stability, and I would like to reiterate that the inflation rate has halved since 2024.
Indeed, inflation has now accelerated, but we attribute this to one-off factors. Prices for products and services which are not responsive to one-off factors have been rising moderately through June, by about 4–5% in annualised terms.
Speaking of the economy, we are all interested in higher growth rates, but the only way to boost economic growth is to use labour resources more efficiently and enhance productivity. The Government is making extensive efforts to achieve this, implementing labour productivity programmes and prioritising projects. Nevertheless, this is about economic policy rather than administrative measures.
As for containing inflation through administered pricing, as you suggest, I believe that such measures may only be used in exceptional circumstances, for example, when prices for socially important goods rise sharply. However, these are ad hoc measures that are only reasonable for a short period since limiting prices through administrative measures for a long time will ultimately cause product shortages.
In my opinion, this is absolutely clear because if producers face growing costs but are not allowed to raise prices, they will start to scale down production, they will not expand production facilities that are loss-making. Indeed, there will be no inflation, but there will be no products at stores either. I think that those who lived in the 1980s remember this very well, and I am sure that those who do would not like to repeat these mistakes.
QUESTION from Frank Media:
In its updated forecast, the Bank of Russia has downgraded the GDP forecast, specifically to 0% for 2026. This is below the forecasts of many analysts, including at the International Monetary Fund, the Organisation for Economic Cooperation and Development, etc. Why do you give these figures, including this lower bound? Given your inflation forecast of 6–7%, is this not already close to stagflation or are such risks still minor?
ELVIRA NABIULLINA:
Firstly, I would like to say that our GDP forecast is 0–1%. As far as I remember, the recent forecast by the Ministry of Economic Development is 0.4%, which is within our range. We have taken into account the temporary reduction in production capacity, but we assume that companies will gradually restore their facilities.
As for lower growth rates this year, although this is still growth of 0–1%, combined with inflation of 6–7% and the attempts to call this stagflation, I think that we should not use this term indiscriminately. It is frequently mentioned to scare everyone.
Indeed, it is easy to scare people with something that is difficult to understand. However, stagflation has a number of features, such as a slowdown in business activity, high unemployment, and fast or even accelerating inflation. Moreover, it occurs not due to tight monetary policy but because of unreasonably accommodative monetary policy, especially when the economy has limited resources.
Therefore, I believe there are no grounds to talk about this. Our monetary policy, which aims to reduce inflation, helps avoid such a scenario. A single year when price growth is provoked by a supply shock may not be called stagflation.
ALEXEY ZABOTKIN:
Stagflation will occur if we respond to these shocks inadequately and try to boost demand through accommodative monetary policy in a situation where the economy lacks sufficient production capacity. In this case, the economy will face stagflation next year and onwards.
QUESTION from Reuters:
My question is about the effect of the market downturn on the banking sector. As we know, the accumulated negative revaluation now totals ₽0.5 trillion. Do you see any risks to resilience of individual banks in this connection?
ELVIRA NABIULLINA:
No, we do not see any risks. Indeed, banks have negative revaluations of securities, but there are positive ones as well. Banks are able to manage these risks. They are aware that the market situation may unfold differently. This is why banks should have adequate capital, including to be protected in unforeseen circumstances. Banks have a sufficient capital cushion. According to our assessments, it now totals around ₽10 trillion, which is quite a large amount.
Furthermore, banks have sufficiently high profits to be able to absorb losses.
QUESTION from Moskovsky Komsomolets:
Some experts, including members of parliament, argue that a key rate reduction directly translates into GDP growth. Is there such a correlation?
Today, the Bank of Russia cut the key rate by 0.25 percentage points. What effect might this have on GDP? If such models exist, how does the Bank of Russia discuss them with the Government?
ELVIRA NABIULLINA:
I would say that this is an oversimplification. If the experts you have mentioned could point to evidence showing that a quick key rate decrease in the current situation would lead to high economic growth rates and not for a short while but for a prolonged period, they would probably become Nobel Prize winners. However, no country facing similar conditions has achieved such a result. This is purely a hypothetical claim without an empirical basis.
As for real scientific data, our study shows what would happen in the current conditions when the economy lacks sufficient resources, if we cut the key rate sharply. I would not provide the details now. The study has been published and is available on the Bank of Russia website. This would cause hyperinflation, while economic growth would be lower, not higher.
The challenge in the current situation is not insufficient demand or a deficit of funds. The problem is that the domestic economy lacks sufficient physical resources, including workforce and production capacity, to be able to expand quickly.
Indeed, many companies report limited demand. However, the difference between microeconomics and macroeconomics is that the latter examines the economy as a whole: demand in Russia has been growing faster than production capacity so far. We will not be able to address this problem through a low key rate.
I would like to make it clear that this should not be interpreted as the Bank of Russia’s unwillingness to cut the key rate as such. As you remember, during the coronavirus pandemic when demand plummeted and production facilities were underutilised, we reduced the key rate to boost demand, specifically to 4.25%. This had its effect and helped the economy rebound to its potential.
However, the current situation is totally different, which is why the solution should also be different. Achieving low inflation is the only way the Central Bank can contribute to sustainable GDP growth close to potential. Boosting potential growth rates requires structural institutional measures which would enhance labour productivity in the first place.
ALEXEY ZABOTKIN:
Nevertheless, the key indicator of insufficient demand in the economy is available labour resources rather than underutilised production capacity in certain industries. When the economy is undergoing structural transformation, some industries will inevitably face underutilised capacity, since labour resources will be redistributed towards higher-priority sectors where demand is stronger, while enterprises which used to employ these labour resources will have idle capacity.
Therefore, underutilised capacity in an individual industry does not indicate insufficient demand. It just means that demand is higher in another sector.
ELVIRA NABIULLINA:
In this regard, a key aspect is the redistribution of labour resources from industries and enterprises where demand is insufficient to those where demand is growing. This is critical during structural transformation to be able to improve the efficiency of the economy as a whole.
QUESTION from Expert:
My question concerns inflation expectations, which have soared to their March 2022 level. You have mentioned the reasons, including the fuel crisis.
Recently, some analysts have told me about a phenomenon in the economy known as a cycle of selective inattention: in good times, people barely notice what the regulator is doing, whereas in bad times, they become particularly attentive to the regulator’s actions and start making their decisions when another shock occurs. Whether the resulting decisions are sound is highly debatable. The Bank of Russia has conducted studies that provide some support for this view.
When people analyse each decision of the regulator, their assessments are biased. When the Central Bank tries to explain its decisions, this communication is difficult and may even fail to change people’s perceptions.
How can high inflation expectations be brought down, especially now, amid transitory supply shocks?
Recently, the Banque de France has released a study of persistent inflation memory and its influence on current beliefs. Does the Bank of Russia have any recipe how to organise this communication, what to do and how to behave, how to lower inflation expectations?
ELVIRA NABIULLINA:
The only solution is to bring inflation down and keep it low long enough for people to see this and gain confidence. However, simply bringing inflation down to 4% is not enough – inflation should be kept at this level for a prolonged period.
The aspects of people’s behaviours, sentiment, and expectations that you describe is a critical factor. Actually, behavioural economics is an essential part of the economic theory since theorists, researchers, and experts are well aware of multiple mechanisms that are able to shift people’s perceptions and affect their expectations; in economics, these are known as cognitive biases.
Selective inattention, which you have just mentioned, is a form of cognitive bias. This has clear practical relevance for us, since it provides an accessible explanation of how inflation expectations de-anchor when inflation remains high for a long period. Of course, people always notice price growth; this is inevitable.
They remember that some of our previous forecasts did not materialise and are therefore sceptical about the regulator’s current commitments to do everything necessary to return to low inflation. Inflation memory is very persistent. I think that this phenomenon appears to be much more complex in Russia than in France that you have just mentioned.
What does this mean? First of all, inflation expectations are crucial, and the Bank of Russia takes them into account. If they are not anchored, as in Russia, we need to focus on them even more than when they are anchored at the target.
Of course, we should not hope that inflation expectations will lower just as a result of our communication, statements, etc. The only way to bring down inflation expectations is to reduce inflation and keep it low long enough for people to become convinced that high price growth has ended.
QUESTION from Krasny Sever, Vologda:
You have already said that improving labour productivity should be a priority for the Russian economy. However, to deploy artificial intelligence (AI) or robotic technologies, companies need investment. Where can they obtain the necessary financing if borrowings are expensive?
Don’t you think that Russian businesses have fallen into the so-called poverty trap when they lack investment because they lack resources, and vice versa, they lack resources because they lack investment?
ELVIRA NABIULLINA:
No, there is no such trap. As for your earlier questions, I have already said that the economy has investment. The investment process continues. Indeed, the growth rate of investment has declined, but the amount of investment still exceeds ₽42 trillion. This is a substantial increase in investment levels. The share of investment in GDP also rose over the past period.
However, investment should be productive – efficiency is the key. In this regard, I would like to provide illustrative figures. Over the past four years, investment increased by a quarter in real terms, whereas labour productivity by 5%. This is what we need to deal with, in our view, especially when the economy has limited labour resources.
As regards the role of credit, it is important for financing the economy as a whole and investment projects in particular. As for the amount raised by companies through credit and bond issuance, the inflow into the economy over the past three years totalled ₽38 trillion. This means that companies do have money. The matter is how they allocate these funds and whether they invest them in areas where the economy’s potential increases the most.
You are absolutely right in saying that deploying robotics and AI technologies is important and requires resources. Nevertheless, I would like to say that, despite everything that we are talking about, despite the existing constraints, investment in this area has been growing faster than overall investment.
However, I would like to stress once again that the key is higher labour productivity in general and not only investment in advanced technologies. Incidentally, statistics show that many enterprises have managed to notably improve their labour productivity even without substantial investment. In terms of business processes and their management, there is considerable scope for improving efficiency.
Of course, this requires redistributing resources, scarce resources, primarily labour force, towards enterprises utilising them most efficiently in order to avoid a situation when these resources are stuck in sectors demonstrating low or even declining productivity.
ALEXEY ZABOTKIN:
This topic was discussed in detail at the Bank of Russia’s Financial Congress in early July. There, Mr Gref presented evidence showing that labour productivity varies significantly across enterprises in the same industry. The reason is the quality of their corporate governance rather than major differences in machinery and equipment.
ELVIRA NABIULLINA:
Compared to other countries, this productivity gap is much wider in Russia. This means that low-performing enterprises will give up their market share to more productive firms.
The fact that the gap remains that wide indicates that resource reallocation towards more efficient companies and sectors remains insufficient in Russia.
QUESTION from Delovye Novosti, NTV channel:
Journalists, market participants, and generally all those who consider themselves economically knowledgeable tend to search for signals from the Central Bank, spotting them in almost everything. At the recent Saint Petersburg International Economic Forum, you wore a white jacket, which they considered a positive signal, but then you attended another event in a black dress, which was taken as a less positive signal. Recently, some of them were concerned about Mr Zabotkin’s yellow and red socks.
We still remember the brooches you used to wear. My question is as follows. Does not the Central Bank think that it is worth inventing a clear new gauge that would show its sentiment, for us to stop analysing your clothing choices?
ELVIRA NABIULLINA:
No, it does not. There is no need to look for any secret signals. We do our best to communicate comprehensive information directly.
QUESTION from Rossiyskaya Gazeta:
My question is about mortgage lending. The composition of mortgage lending is increasingly shifting towards market-based programmes with interest rates still at 16–18%. This raises the following question. How will the anticipated changes to subsidised programmes affect the market? What should borrowers expect in such a situation? Should they expect loan refinancing, or maybe, the introduction of housing deposits, or income growth?
ELVIRA NABIULLINA:
Unsubsidised mortgage rates are still high, but I should say that they are declining. We can see that the amount of new market-based mortgages has been growing.
Additionally, the Government’s efforts to make subsidised programmes more targeted also help increase the affordability of market-based mortgages.
I always repeat this and would like to reiterate now that the larger the volume of subsidised lending, the stronger its effect on real estate prices and the higher market rates tend to be.
I would not give any specific recommendations because circumstances differ: some prefer to wait for a lower key rate, others may have sufficient savings.
Nevertheless, I would like to stress that our policy aims to ensure a faster decrease in interest rates. Lower inflation will help accelerate the decrease in market rates. Our objective is to make market mortgages more affordable for a wider range of households, as was the case when inflation was low, which I also recall every time.
QUESTION from Russia 24:
How do you assess the development prospects of the platform economy in view of the attacks on the largest marketplace?
And question two, please. The State Duma has recently passed a law on cryptocurrencies. Don’t you think that this law creates unequal conditions between non-qualified investors, who have very few options available to them, and qualified investors? Could this provoke a market gap between those with full access and those with almost none?
ELVIRA NABIULLINA:
As for the platform economy, this is a development trend we cannot reverse. It is the result of advanced technologies. The platform economy benefits both manufacturers and consumers by providing a channel through which people can access resources, goods, and services they need at lower prices, while manufacturers incur lower costs. It has its challenges, including those related to antimonopoly regulation, etc. Nevertheless, this area will continue developing, in my opinion.
Speaking of cryptocurrency, as you know, this classification of investors as qualified and non-qualified is a common principle for the entire financial asset market. This division is not specific to cryptocurrencies.
Indeed, qualified investors have more opportunities since they are more experienced and can properly assess risks inherent in complex instruments.
For non-qualified investors, opportunities are much more limited. The law therefore protects non-qualified investors by preventing them from taking on risks that they may be unable to understand and that could result in the loss of their funds. Moreover, if they borrow funds to invest, they might even end up in debt. This logic applies to cryptocurrency as well.
Everyone is aware of cases where cryptocurrencies were flagged as Russia-linked assets and seized from their lawful owners just because of that link, let alone the volatility of cryptocurrencies.
However, it is incorrect to assume that individuals may not receive the qualified investor status. There are multiple criteria to be eligible for this status. In addition to the value of assets, these criteria also include experience, which is assessed taking into account cryptocurrency transactions, among other factors, and education. In the near future, people will be able to obtain this status by passing a special test.
Additionally, I would like to stress that there are no restrictions on transferring cryptocurrency abroad. Both qualified and non-qualified investors have equal rights and opportunities with respect to these transactions, just like now in the case of foreign currency transfers to foreign accounts. This option may be needed to pay for medical services and education.
Nevertheless, investors should remember that Russian law does not protect them when they conduct transactions abroad, and should any problems arise, they will have to solve them in a foreign jurisdiction. We saw this recently when foreign jurisdictions blocked assets.
QUESTION from News.ru TV channel:
You mentioned higher taxes among the reasons for rising inflation expectations at the beginning of the year. How well are monetary and fiscal policies coordinated in general? Are there many inconsistencies, given that these policies address slightly different tasks?
ELVIRA NABIULLINA:
Indeed, the tasks and tools differ. Nevertheless, it is worth noting that the coordination between monetary and fiscal policies does not mean that they should have the same stance. Expansionary fiscal policy does not dictate accommodative monetary policy, nor does contractionary fiscal policy necessarily require monetary policy to be tight.
If the fiscal system needs more resources for priority projects, as is the case now, monetary policy should take this into account and help the economy navigate this phase without an acceleration of price growth. Among other things, this means that the more money the economy receives through the fiscal channel, the smaller the inflow through private credit should be. Otherwise, the Government will be unable to achieve its objectives.
This is exactly the situation we find ourselves in today: our monetary policy is tight, while fiscal policy is expansionary. However, this does not mean that the two policies are not coordinated. To the contrary, this is a balanced macroeconomic policy in general. The Bank of Russia continuously communicates with the Ministry of Finance and the Government as a whole to discuss the current developments and share our views and forecasts. Therefore, the coordination is quite efficient, in my opinion.
Of course, the key to successful coordination is timely information about changes in parameters. Changes in fiscal policy parameters are what matters most to us. We are aware that there are now objective reasons forcing the Government to adjust fiscal policy parameters more frequently and, apparently, more considerably than before 2020. Our close coordination with the Government helps us take these changes into account as early as possible.
Indeed, the Bank of Russia and the Government have different mandates and different tasks, but we share a common goal, which is to promote conditions for sustainable economic growth, maintain macroeconomic stability, and in doing so, create an environment that will improve people’s well-being.
QUESTION from PRO.FINANSY project:
Amid the expansion of sanctions, Russian investors’ confidence is not growing, to say the least. Accordingly, my question is as follows. What else does the Bank of Russia plan to do to protect the rights of Russian investors whose assets have been immobilised abroad? Do you plan to introduce any new stages for exchanging frozen assets with foreigners, let’s say, before the end of the year?
ELVIRA NABIULLINA:
We discuss a number of options with the Ministry of Finance in order to help Russian investors facing such a situation and decrease the amount of assets they cannot access freely.
However, as you know, foreign regulators tend to hinder the implementation of certain mechanisms that we are developing for this purpose and block residents’ transactions. Therefore, we prefer not to disclose our initiatives in advance.
QUESTION from Market Power project:
Don’t you think that, by publishing an overly optimistic forecast for the average key rate in 2027–2028, the Central Bank could have somehow contributed to the faster growth in corporate lending in the spring months?
ELVIRA NABIULLINA:
No, we do not. In the first place, I would not call it overly optimistic. We build our forecasts on the assumptions that you are familiar with, including the budget forecast. We relied on the announced budget parameters that were in force at the time. Of course, when the situation changes, we adjust our forecast. However, this does not mean that the forecast was too optimistic back then; it reflected the situation in the economy at the time.
As for faster growth in corporate lending and an overall increase in credit in the spring months and in the second quarter, it was broadly expected considering the standard time lags of our decisions on monetary policy easing. We have been easing our monetary policy since mid-2025 and this should certainly have an effect on lending dynamics.
Nevertheless, the growth rates of lending in April–May were indeed elevated. We said after the previous meeting that if they remained heightened, this would become a matter of concern.
We observe a certain slowdown in June. Taking into account expansionary fiscal policy, lending growth should be more moderate in 2026 H2 compared to 2026 Q2.
QUESTION from finance.rambler.ru:
In an interview with Vesti in early July, you said that Russian households had opportunities to make profitable savings. How will today’s decision affect them? What saving instruments would you recommend today?
ELVIRA NABIULLINA:
Savings remain attractive, in our view, which is obvious from growth in bank deposits, by the way. Our policy aims to ensure the attractiveness of the ruble and ruble-denominated savings and deposits. Generally, this means that interest rates should be higher than inflation, which is what we see now.
As for my advice, I usually refrain from giving such recommendations. I would like to reiterate that the objective of our policy is to make ruble assets attractive to Russian households.
Thank you for your attention.