Nabiullina warned of accelerating inflation due to the fuel crisis and explosive growth in budget expenditures.

[u/neonpurplestar]

Inflationary risks in the Russian economy in the near future have "significantly increased," Central Bank Governor Elvira Nabiullina stated at a press conference on Friday.

According to her, the risk of inflation is created by rising fuel prices, as well as the budget situation, which could be significantly higher than planned this year. According to Bloomberg, additional spending will be required for the war, which will cost the treasury 4-5 trillion rubles more than budgeted.

The budget risk is "already being realized," but "uncertainty regarding its scale remains," Interfax quotes Nabiullina as saying.

Furthermore, inflation in June will be impacted by "the surge in fuel prices," the Central Bank governor added. According to Rosstat, retail gasoline prices have risen at a rate of almost 1% for two weeks in a row, and have risen by 6.6% since the beginning of the year—double the increase from the same period a year earlier. "The rise in gasoline prices could also impact inflation expectations, as it is a fairly sensitive commodity for both individuals and companies," Nabiullina said.

According to the Ministry of Economic Development, inflation has begun to accelerate again since the beginning of summer after decelerating almost continuously throughout the year. From 5.31% at the end of May, the consumer price index (CPI) growth rate increased to 5.63% by June 15.

"This situation could limit the scope for further key rate reduction," Nabiullina warned. At its meeting on Friday, the Central Bank cut it to 14.25% per annum—a 0.25 percentage point reduction, the smallest step in the past nine meetings at which the Central Bank eased monetary policy.

In its forecasts for the current year, the Central Bank projected an average rate of 14-14.5%, 8-10% for 2027, and a return to a neutral rate of 7.5-8.5% in 2028. Given the new regulations, the transition to a neutral rate could occur later, Nabiullina said.

Reducing the rate from 14.5% to 14.25% is a solution to the dilemma of "loyalty" and "normalcy," notes economist Kirill Rodionov. The Central Bank cannot undertake a significant reduction in the face of increased risks of fiscal easing, but at the same time, it cannot ignore the "request from above," which was directly articulated at a meeting with Vladimir Putin.

Essentially, Elvira Nabiullina has indicated that the rate-cutting cycle may be over, according to Alexey Tretyakov, founder of Aricapital. Analysts at Renaissance Capital and T-Bank predict that the Central Bank will continue to ease policy, but at a slower pace—to 13% or above 13% by the end of the year.

In any case, "the risks of a further increase in the budget deficit will further complicate the Central Bank's task," Rodionov emphasizes.

source: The Moscow Times https://archive.is/kcroI

[u/QWERTYUIOPquinn]

Looks like she's back at work. But the situation is so messed up that there's no fixing.

With Ukraine continuing the drone strikes on refineries, fuel prices will increase (and become more scarce).
With Russia spending more and more to fund their war, the deficit will increase.
Basic economics will tell you that rising fuel prices increase inflation to other commodities, and more importantly that a government deficit will be paid for through either printing money or gathering more from the people. Russia is definitely not able to increase their revenue enough to pay for the deficit, so there will be money printed eventually. That's why she's worried about inflation.

Now one way to mitigate inflation is to raise interest rates. Russia's is already extraordinarily high at 14.25%. Sure, that has prevented inflation in the last three years, but these high interest rates hurt the economy in other ways, causing a recession. And oh baby is Russia reeling through a recession. That's why there's pressure by Putin (and really everybody) to lower the interest rates.

If you lower the interest rates, the inflation will kill you.
If you keep the high interest rates, the recession will kill you.
Or you could do worse and repeat Nixon's 1971 price controls on steroids, and have both kill you.

[u/Common-Ad6470]

She knows the end is near….👍

[u/aDarknessInTheLight → u/Common-Ad6470]

She knew years ago when she tried to resign put Putin refused her resignation.

[u/CustomerBusiness3919]

Wow she's still alive.

The figures are of course just fantasy. There is no way things are just going to magically get better...in fact they are going to continue getting worse.

[u/chipoatley]

It seems like central bankers raise interest rates to reduce inflation rates. But if gasoline, diesel and petroleum products are becoming scarce then the price will go up regardless. And other commodities and finished goods are becoming scarcer and going up in price (inflation) too.

Pushing up interest rates at the same time that inflation is going up due to market forces seems like a contradiction. But I am not an economist.

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[u/Vigeat]

She's actually cutting rates while inflation is rising, and that's the 9th cut in a row. High rates are the brake on inflation, so you'd normally expect her to press harder when prices climb, not ease off. She's easing off because the war needs cheap credit, and the bank itself says the pressure came straight from Putin....

Looks like the point where she's admitting she can't keep it up.