Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 24 October 2025
Good afternoon. Today, we have made the decision to cut the key rate to 16,5% per annum.
The situation has been developing generally in line with our forecast. Monetary conditions remain tight, fostering disinflation. Therefore, we have made the decision to continue monetary policy easing. At the same time, significant proinflationary risks have materialised since the previous meeting. They are primarily associated with an increase in the budget deficit in 2025 and higher fuel prices. In September, a decline in underlying inflation measures paused. The expected increase in taxes will help bring inflation down over the medium-term horizon, but will also lead to a one-off rise in prices in the short term. We have factored this into our decision, first, by reducing the pace of monetary policy easing, and, second, by revising upward the projected key rate path required to bring inflation back to 4%.
I would now dwell on the reasons behind our today’s decision.
Firstly, inflation.
Current price growth rates were up in September, which was primarily attributed to the dynamics of petrol and vegetable prices. Let me remind you that we observed an unusually early and considerable seasonal decline in fruit and vegetable prices in the summer period. In the autumn, they resumed growth earlier than usual. A change in the seasonal trends in vegetable prices and tightness in the fuel market are temporary factors that have led to an acceleration in current price growth.
However, even if we strip these and other transitory factors from inflation, its underlying measures are still above 4%. They are not demonstrating a sustainable downward trend. Most measures of underlying inflation have remained in the range of 4–6% for several months already.
Inflation expectations stay high. In October, companies’ price expectations even increased after remaining virtually unchanged for several months. They were mostly up in trade. Businesses explain this increase by the expected rise in taxes, among other factors. Households’ inflation expectations remained unchanged in October.
In the updated forecast, the inflation rate projected for the next year has been raised to 4–5%. This is attributed to temporary proinflationary factors, including the situation in the fuel market, the rise in taxes, as well as the indexation of utility tariffs at a higher rate. According to our estimate, these factors will continue to pass through to prices until mid-2026. Underlying inflation will return to 4% in 2026 H2. In 2027 and beyond, annual inflation will remain at the target.
Secondly, the economy.
According to recent data, its growth decelerated in 2025 Q3. Dynamics remain uneven across sectors. Certain industries continue to grow steadily, e.g. pharmaceuticals, food industry, public catering, and tourism. Contrastingly, a number of sectors are registering a decline in output, like metallurgy and coal production. The situation in those industries is not so much attributed to tight monetary policy effects as to the worsening of the external environment and lower export opportunities. Overall, industries that are mostly focused on domestic demand are performing better.
The expansion of consumer demand sped up somewhat in 2025 Q3. In part, this was associated with the fact that people were buying more cars in anticipation of a rise in the vehicle recycling fee. As for investment demand, we can say that it stays at the high levels it has reached earlier. This is evidenced by business surveys. The situation here is also uneven across sectors and companies.
Last year’s strong economic overheating gradually subsides. This is happening due to more moderate demand dynamics as compared to 2024, coupled with an ongoing expansion of companies’ production capacities. However, certain indicators show that this process still remains unfinished, particularly the indicators of labour market tightness, including historically low unemployment levels and growth of wages outpacing that of labour productivity. Nevertheless, we are registering some signs of an easing in the labour market.
When discussing key rate decisions, we traditionally pay attention to companies’ financial resilience. Their profits are going down, with the process being uneven across sectors, while businesses’ overall financial position remains stable. The Bank of Russia’s regional branches conduct regular surveys of 15,000 enterprises all over Russia. We are recording the worsening of the financial position of small and medium-sized enterprises. This sector is the most vulnerable to cooling demand, rising taxes, and high interest rates. We take into account the situation in the real economy when making key rate decisions.
According to our estimates, the phase of economic overheating will come to an end in 2026 H1. Considering its actual dynamics, we have lowered the GDP growth forecast for 2025 to 0.5–1.0%. Over the next years, GDP growth will accelerate.
Thirdly, monetary conditions.
Overall, they have barely changed, remaining tight. In July–August, interest rates in the economy were going down due to monetary policy easing. By October, this decline had stopped. This was associated with the expectations of a more gradual easing of monetary policy, as well as new fiscal parameters and the reassessment of risks.
Corporate lending growth has sped up in recent months, as compared to 2025 H1. In the updated forecast, we have raised the estimate of the corporate loan portfolio expansion for 2025 to 10–13%. The retail lending forecast has been kept unchanged. Overall, lending to the economy will grow by 8–11% this year.
The deposit market has, for the most part, completed its adjustment to the key rate decisions made earlier. A number of banks have revised deposit rates upwards, following their substantial decline in the summer. Households’ saving activity generally remains high. This creates prerequisites for disinflation.
Briefly about external conditions.
The global economy continues to slow down, albeit more smoothly than expected. We have made minor adjustments to the forecast of oil prices for 2025 taking into account their actual dynamics. The forecast for subsequent years has been left unchanged.
The ruble has strengthened somewhat since the previous meeting, which may, to a great extent, be attributed to tight monetary policy effects. High interest rates make assets in rubles more attractive than foreign ones. The ruble appreciation has also been driven by one-off factors. In particular, demand for foreign currency has been lower than at the beginning of autumn when some companies were accumulating it to repay loans.
Given these trends, we have kept the forecast of the balance of payments virtually unchanged.
I will now speak of risks.
The ratio of risks is still shifted towards proinflationary ones. Risks associated with inflation expectations persist. There is uncertainty about the extent to which rising prices for petrol, elevated rates of the utility tariff indexation, and increasing taxes will translate into expectations. Although these are one-off factors of price growth, if they lead to an additional rise in inflation expectations, second-round effects on inflation will be stronger.
Current proinflationary risks also include lending growth acceleration at a rate higher than forecast by the Bank of Russia and rising labour shortages. Furthermore, risks to oil prices have increased. The global oil market has shifted to a surplus. This might have a significant impact on prices. For Russia, the situation will be additionally complicated by the sanctions.
There is persisting uncertainty related to geopolitics. Everything will depend on how the situation develops.
Finally, regarding our future decisions.
In recent months, new factors have emerged that will notably impact inflation over the next few quarters. The adjustment of companies, markets, and the entire economy to these factors will take time. So far, the balance of factors requires a higher-than-expected key rate path to ensure a sustainable return of inflation to the target. In the updated forecast, we have raised the key rate range for 2026 to 13–15%, which will make it possible to achieve our 4% inflation target and keep inflation at this level further on.
Thank you for your attention.
Q&A for the Media
QUESTION from TASS:
What would you say about the room for rate reduction at forthcoming meetings? Also, the traditional question: which options were on the table today?
Elvira NABIULLINA:
Our forecast for the key rate path, including for this year, assumes a potential further cut at the December meeting as well as keeping the rate unchanged.
Let me highlight the Board’s neutral signal for the upcoming meetings. This means that a further reduction at its upcoming meetings is not a foregone conclusion.
To further reduce the rate, we will need additional evidence that we can move on without the risk of underlying inflation sticking above target in 2026. This will likely be the key factor for our decision.
Which options did we consider? We discussed three options in detail: 16%, 16.5% and no change – 17%.
There were multiple arguments in support of each, but the key differences in positions are essentially about the estimate of underlying inflation and the extent of concern about the scale of secondary effects that one-off inflation drivers may bring. We can see that one-off inflation drivers are indeed in place, but their secondary effects are really difficult to estimate.
The advocates of a more significant decrease expect underlying inflation to move fairly rapidly towards the target thanks to cooling demand, without much impact from one-off inflation drivers.
Conversely, those who spoke for no change believe that underlying inflation has yet to decline to 4% and that it probably remains close to 6% without any strong decline in recent months.
That is, our colleagues who spoke in favour of holding the rate fear a more pronounced and long-lasting impact of one-off drivers on inflation expectations – given that overheating demand has yet to fade away and that inflation expectations are high and unanchored – than would be with low inflation and balanced growth. In their view, this warrants more caution in subsequent steps towards monetary easing.
Alexey ZABOTKIN:
To add to this, VAT was increased in 2019, at a time of low inflation expectations and low inflation.
QUESTION from Rossiyskaya Gazeta:
Do you think the new US and EU sanctions will weigh in on inflation and key rate decisions? If so, what is the transmission mechanism of this impact?
Elvira NABIULLINA:
Clearly, these sanctions are primarily about restricting our commodity exports. The precise impact of these sanctions is highly unpredictable, but they are a negative external factor. Much will depend on future adaptation to these sanctions. We know from previous episodes that adaptation takes some time, but it ultimately occurred.
This is why there is no need at this juncture to assume a change will be needed in monetary policy decisions. We will monitor the situation as it unfolds.
QUESTION from Bitkogan project:
Over the last three years, the Bank of Russia has faced a series of one-off proinflationary shocks that have consistently prevented it from reaching the inflation target. Does the Bank of Russia consider these shocks to be somehow correlated? What is their cause? Should we expect similar proinflationary shocks in the future that are currently not in your forecasts?
Elvira NABIULLINA:
By their nature, shocks are largely unexpected. We account for the risk of such shocks in our assessments. Indeed, there has been a significant number of proinflationary shocks. The central bank can shrug them off if they are temporary, one-off, supply-side shocks and if they come without secondary effects on inflation expectations and – through inflation expectations – on people’s consumption and saving patterns.
However, secondary effects are not impossible, and if one-off factors, as we are seeing now, are overlapping, such secondary effects could in principle be considerable and must be factored in. That is also one of the reasons we raised the key rate path. The influence of these combined shocks on inflation expectations and their secondary effects was indeed a major part of our discussion.
QUESTION from Rossiyskaya Gazeta, Vladivostok:
There is a feeling that inflation is being affected by any factors except the key rate. What if the key rate is reduced drastically, to at least 15% for example, or even 12% by year-end?
Elvira NABIULLINA:
All right, let us consider a scenario where the Central Bank reduces its rate to 12% despite all the inflation risks and inflation. What happens? First, we see an increase in credit demand: everyone wants a loan. This triggers a spike in aggregate demand. However, the supply of goods and services cannot catch up since there are no spare resources, labour in the first place, to expand production.
The result is clear, in my view: inflation rapidly exceeds 12%. Even if the rate is unchanged at 12%, we have runaway inflation given that the real interest rate is negative. This pushes both credit and demand higher still, prices rise faster, and so on in a vicious circle. In this case, inflation not merely remains high – it accelerates every month.
I believe that global experience is very telling in this regard, as is our experience from the 1990s: this is a scenario of rapidly accelerating inflation and even hyperinflation. This is exactly how spiralling inflation develops, and I want to emphasise, always and everywhere.
We should further take into account that growing demand would come with higher demand for imports. The inclination to save in rubles would diminish as long as interest rates fail to offset inflation. This means an acute weakening of the ruble. Eventually, both imports and domestic goods become less affordable. Ultimately, all this would hit people’s wealth. The inflation problem would still have to be addressed, but more stringent measures would be needed and a drastically higher key rate.
QUESTION from Interfax:
From your statement, we understood everything except why you ultimately chose to cut the rate. Do you consider this 50 basis-point step a symbolic move, intended to balance the statements of the press release? What is your assessment of changes in household inflation expectations in October? They were unchanged, despite higher petrol prices, fruit and vegetables prices and the potential VAT rise, while observed inflation even declined?
Elvira NABIULLINA:
Why did we reduce the rate? Let me try once more to outline the factors that propelled us towards policy easing, even if slow and cautious.
I believe we are, in any case, in a monetary easing cycle. While this cycle comes with pauses, you can see from the key rate path we present for next year that monetary easing is ongoing, albeit more cautious.
Why is this possible? We see that demand growth is decelerating and overheated demand is receding, and we expect the demand gap to close in the first half of next year. This a baseline forecast assumption. Therefore, it is possible to move ahead, but more cautiously, due to a large number of temporary inflation drivers with potentially strong secondary effects and due to the labour market.
Why cautiously? This is due to the labour market that is still tight. But why is easing possible? This is thanks to signs of easing that is emerging in the labour market.
We have yet to see the latest statistics, which come in with a lag – but we have survey data and data from headhunters, and they reveal a decline in job openings. Furthermore, survey data suggest a declining share of companies with labour shortages, although the number of them is invariably high. Still, we are seeing a slightly less tight labour market.
Regarding inflation expectations, and why they are unchanged and the factors behind this, I will ask Mr Zabotkin to comment.
Alexey ZABOTKIN:
This likely reflects the process of deceleration in current price growth including for some other visible goods than those that have seen a spike in prices. For a certain range of goods and services, people are seeing that prices in the second half of this year grew slower than in the first, and slower than in the second half of last year.
Having said that, inflation expectations remain within the range of 2024 and above the range seen in 2023. Understandably, inflation was high in both 2023 and 2024, so the fact that inflation expectations have been stuck at this level is not a positive development. Nevertheless, the fact that they did not increase is a positive signal.
QUESTION from InvestFuture project:
What is your assessment of the VAT hike combined with the recycling fee? Mr Zabotkin has put the expected impact of the VAT hike at about 0.6–0.7 pp. Considering the recycling fee, what are the likely implications for monetary policy?
Also, regarding oil prices: until recently, they were on a downward trend. If they continue to decline, how could this affect the Russian economy and your monetary policy?
Elvira NABIULLINA:
Let me begin with an important general observation. It is quite difficult to quantify the impact of each one-off factor on inflation, especially if such factors are concurrent, as is the case with the VAT change and recycling fee.
We provide the numerical estimate for the VAT rise based on the experience of increasing VAT by 2 pp. At the time, there were no other concurrent proinflationary factors. Given that prior experience resulted in a 0.6–0.7 pp impact, we have now put the impact at 0.8 pp considering a change in the calculation rules, including for small businesses. We put the direct contribution at 0.8 pp. Undoubtedly, much will depend on the secondary effects, which could be larger this time than in 2019.
It is quite difficult to produce a direct impact for the recycling fee, but, in our view, this impact is expected to be less than that of the VAT increase.
As for oil prices, their current fluctuations have no major implications for our policy or decisions. Why is that, when everyone is accustomed to oil prices being a critical factor? First, the range of these fluctuations is currently close to our forecast and baseline scenario assumptions.
Second, and this is perhaps the most important point fundamentally, the operation of the fiscal rule. The fiscal rule essentially neutralises the impact of oil price fluctuations on our economy. It absorbs the lion’s share of this volatility. Certainly, it fails to absorb 100%. Therefore, strong fluctuations in oil prices – deviations on the order of tens of percent from our forecast – suggest disinflationary effects for the economy and inflation if oil prices are high, and proinflationary effects if they are low. This will be factored into our monetary policy decisions, but now this is not the case.
And a further elaboration. The impact of oil prices is neutralised as long as the National Wealth Fund has sufficient resources for this neutralisation, that is to set off a shortfall in oil and gas revenues. Should these funds be depleted, the effect of the fiscal rule as a hedge against temporary price downturns would also be exhausted.
That is why we welcome the Government’s plans for the cut-off price to be gradually reduced. Long term, this will work as more reliable protection for the economy and budget against oil price fluctuations, including against a scenario where the long-term export price of oil falls below $60 a barrel.
Alexey ZABOTKIN:
I have another comment on the estimated impact of one-off factors. How does econometric analysis work? It allows us to isolate one-off supply-side factors in their totality, that is price changes that cannot be attributed to demand-side factors. This kind of analysis is published, in particular, in Talking Trends, a Research and Forecasting Department bulletin, which features a relevant chart.
However, this exercise only permits the isolation of the aggregate contribution of one-off supply-side factors. When several of them occur simultaneously, it is rather difficult to disaggregate them and assign a specific weight to each, as they also interact with one another.
Therefore, we will be able to calculate the total contribution of the one-off factors once they are past January, but I do not believe we will be able to state precisely how much was due to the VAT, how much to the recycling fee, and how much to the lagged effects of fuel prices.
QUESTION (RIA Novosti):
Central Bank data show that gold holdings in Russia’s international reserves were up in September for the first time in a year and a half. What could be behind this?
Elvira NABIULLINA:
This is likely a valuation effect, associated with a rise in gold prices.
Alexey ZABOTKIN:
In dollar terms, this is due to price growth. Minor movements in physical volumes are also linked to the transfer of gold between ourselves and Goznak for minting.
QUESTION from 78.ru, St.Petersburg:
Many experts describe the current appreciation of the ruble as unexpected and unfavourable for the federal budget. Is the Bank of Russia concerned about this, and will this trend influence your key rate decision?
Elvira NABIULLINA:
The short answer is that a strengthened ruble is a logical effect, a natural consequence, of a tight monetary policy. That is, it is the exchange rate’s response to monetary policy. Doubtless, the impact of the exchange rate on the economy and the budget is a factor in our decisions.
However, there are several further considerations. First of all, I must reiterate that we operate a floating and market-based exchange rate. It reflects the resulting influence of multiple factors such as export capabilities, import demand, demand from Russian residents for foreign assets, and demand from foreigners for Russian assets, although the latter has recently become less significant. The exchange rate essentially balances the influence of all these factors on the economy and its components.
This year, the ruble is stronger than last year. Importantly, the comparison should be made to the average exchange rate for 2024 considering strong intrayear fluctuations. The ruble strengthened against the past year’s average by about 10%. This largely reflects the objective effects of a tight monetary policy; it reflects the functioning of its foreign exchange channel, and is in essence a channel for disinflation.
Incidentally, if this channel were to be disabled, as proposed by those who advocate for administrative control over the exchange rate and artificial resistance to ruble strengthening, a higher key rate would be required to bring inflation down. This is an important point.
Furthermore, and this is something we may not have emphasised enough before: there are structural factors at play. Beyond exports, imports, capital flows, and our monetary policy, the exchange rate is now being influenced by structural factors – meaning they are not temporary, cyclical, or related to monetary policy.
These structural factors are pushing the ruble upwards compared to before 2022. These factors are constraints on imports, both external and internal. By internal constraints, I mean import substitution, protectionism, localisation requirements, and the requirement that domestic products be purchased within the public sector and state procurement. These will objectively constrain imports and, everything else being equal, will push the GDP share of imports lower. Clearly, the ruble will strengthen as a result. If there are many such measures, the effect may be quite significant.
The second long-term factor is a decline in household demand for foreign assets such as foreign currency, securities and industrial assets in unfriendly states, because of sanctions risks and restrictions. This must also be understood.
The third is an increased cut-off price under the fiscal rule (as well as the use of the NWF to cover the deficit on top of the fiscal rule and investing NWF funds in projects – Ed.). That is, this means more extensively used oil and gas revenue. Structurally, this is also helping a stronger real exchange rate.
Finally, regarding the budget, the budget needs low inflation no less than households and businesses do. Surely, the budget does not at all benefit from high-speed indexation caused by high inflation and rising interest costs and debt servicing costs – these are nothing but negative effects for it.
QUESTION from Moskovsky Komsomolets:
Clearly, the Ministry of Finance is attempting to eliminate the budget deficit. In this context, back in September, the State Duma proposed a 10% excess profit tax on banks to be paid by 28 January of next year. What is your view of this initiative, considering that the banking sector is on track to report ₽3–3.5 billion in profits this year (even adjusted for losses due to sanctions), according to the regulator’s data? As an effort to close the budget deficit, how can this initiative affect the key rate and deficit reduction? Do you have estimates on that score, and what do you make of such initiatives?
Elvira NABIULLINA:
In my opinion, this will surely bring no benefit to the economy and will not lead to a lower key rate – quite the opposite. Why? It is very important to understand how banks operate and use their profits. As in other sectors, most banking sector profits are invested. In banking, these are called capital rather than investment. In production sectors, investment goes into machinery and equipment; in the banking system, into capital replenishment.
Why do we need capital replenishment, especially when the external funding sources are unavailable? It is capital that enables banks to expand lending to the economy. As a matter of fact, each ruble withdrawn from capital is a
Let us see how these profits are used. We already have data for the first nine months: banks earned ₽2.7 trillion. This is a large amount. Capital growth is ₽1.7 trillion. Over the period, banks paid ₽800 billion to the budget in taxes, and state-owned banks paid a further ₽500 billion in dividends for 2024. We remember that a considerable portion of banks are state-owned, and they pay dividends to the budget.
This is why I believe that such excess profit taxes will not only drive down potential, but also lending to the economy.
QUESTION from Reuters:
Regarding the impact of new sanctions on the rate, you say that they are a negative external factor. If we look into their impact on the ruble exchange rate, could it happen that the sanctioned oil companies rush to convert their foreign currency reserves, thus helping a further strengthening of the ruble? What is your view?
Elvira NABIULLINA:
No, we do not see such a risk.
QUESTION from Frank Media:
Yesterday, Andrei Melnikov, CEO of the State Corporation Deposit Insurance Agency was arrested. You are the Board chairperson of the Deposit Insurance Agency. Can you comment on this news? Have you dismissed Andrei Melnikov from his post? Which replacement will you consider?
Elvira NABIULLINA:
No, I am not prepared to comment on this matter at this time.
QUESTION from Khakassia newspaper, Abakan:
In October, both diesel and petrol prices have been rising across the whole country. This is quite the case in Khakassia. Rising fuel and lubricant prices means rising inflation expectations. Evidently, people are worried. In making its key rate decisions, did the Bank of Russia take into account these concerns and growing prices in the fuel sector?
And another question, please: what other areas do you consider of most concern to households in the context of inflation expectations?
Elvira NABIULLINA:
This is a good question as it relates to one-off inflation drivers. Petrol prices are certainly a factor we consider. Petrol accounts for a large share (4.4%) of the consumer basket. We can see that there is an excess price increase (of 2.3 pp) compared to the average path that would lead to 4%, accounting for seasonality. Of that number, 0.4 pp is the direct contribution of growth in petrol prices.
However, there is also the indirect effect you mentioned: petrol and diesel are the key components of corporate transport costs, though this effect materialises gradually.
There is also an indirect impact: rising petrol prices drive inflation expectations higher, primarily household expectations, not only for companies. People fear that rising petrol prices may drive all other prices higher, pushing up prices for a broad range of goods and services, and thus accelerate inflation. This is what we call secondary effects, which are rather difficult to estimate in advance, but their possible emergence is a factor to consider. If such secondary effects are high and inflation expectations increase, the key rate will have to be raised, and this factor will be considered in our future decisions.
Petrol is undoubtedly one of so-called visible goods. These are the goods people have in mind when they estimate current and future inflation.
The other primary areas for people to react to are staple goods such as bread, milk and eggs; among them are certainly housing and utility services. Therefore, rising prices for these products, even if caused by temporary causes, may send inflation expectations higher. We are attentive to these trends, and we discuss them when we make decisions.
QUESTION from RBC:
Your October press release says that the disinflationary impact of the budget will be less pronounced than earlier. Yet, just one month ago, you mentioned that our budget was disinflationary. Can you please explain to us what happened this past month that made you slightly revise your estimate?
Elvira NABIULLINA:
We revised the estimate for this year’s deficit upwards. While we still consider the budget disinflationary, its disinflationary impact is far weaker.
Alexey ZABOTKIN:
It seems to me that what we said a month ago does not contradict what we have said today: the budget’s disinflationary contribution is smaller this year, but the budget remains disinflationary nonetheless.
QUESTION from Economikal Telegram channel:
Today, I have a question that continues the topic ‘What if the key rate were half its current level?’ Actually, talk of this has been ongoing in the media and even among politicians for the past two years, and for some reason the common view is that the key rate is responsible for all the problems in this country. If it were half, we could be on board an economic rocket and fly. That said, the question is where.
I meant to ask you if you perhaps thought not only about explaining at the press conference why this is a bad idea, but also about including some analytics in your materials as to why this is so. It seems verbal explanations are easily forgotten, whereas a published document would enhance the transparency of monetary policy for the public, helping them understand why the key rate is at its current level and that things would be worse if it were different.
Elvira NABIULLINA:
Thank you very much for the suggestion and for the question itself as it is undoubtedly important. There is a myth, a certain perception, that lowering the key rate will reduce inflation and spur economic growth.
Global experience, as well as our own history, is disregarded. But I would rather our country did not relive that experience – the erosion of savings, dropping living standards and higher inflation. This is something we must make every effort to prevent.
You are right that we need to continually explain this logic. We will look into how we could cover all this in our analytical materials, although they are read mainly by analysts. We are grateful to our colleagues, journalists and bloggers who pay attention to our materials. We seek to explain this reasoning through all available channels, and will continue to do so.
We welcome all your suggestions on this matter.
Alexey ZABOTKIN:
Thank you for the suggestion. The Bank of Russia’s forecasting models are a clear and transparent tool. They are available on the Bank of Russia website with a great deal of detail.
This year, we have even released the ready-made software code so that anyone proficient in MATLAB can install and run it, and see how it works.
We have yet to figure out how this tool can be made very easy to play so that the mass user can experiment with this without learning advanced programming skills.
Elvira NABIULLINA:
This is perhaps not a bad idea – making some kind of interactive model, a simulation, to help people understand the consequences.
Alexey ZABOTKIN:
Thank you for the idea.
QUESTION from Izvestia:
Elevated inflation expectations are now one of the key problems of monetary policy. How does the Bank of Russia intend to approach this issue? Under what conditions could inflation expectations stabilise? Is it correct that in such a case the Bank of Russia would be able to speed up rate cuts?
Elvira NABIULLINA:
The only reliable way to reduce inflation expectations is to ensure sustainable disinflation. Household expectations for persistently high inflation will lower as soon as people can see that shop prices are not always rising. If they rise rapidly, households will have high inflation expectations, no matter what we say. Therefore, it is imperative that we continue to reduce inflation.
However, you are absolutely right: a drop in inflation expectations and their stabilisation at low levels will enable us to decrease the key rate more rapidly.
Alexey ZABOTKIN:
One more comment: once inflation expectations have become low, they will take several years to become anchored. If they are low and anchored, there is less need for the policy rate response to short-term inflation fluctuations in order to maintain low inflation in the future. That is, the more anchored inflation expectations are, the less monetary policy needs to respond to demand-side shocks.
QUESTION from Anna_finance project:
In its Q2 report on unacceptable practices, the Financial Ombudsman Service says that banks are selling loan insurance with large markups. The report cites specific situations when a bank sold insurance for ₽490,000 but transferred a mere ₽43,000 to the insurance company. This pattern is in place at different banks with similar figures. The question is: does the Bank of Russia plan to monitor this situation more stringently so that borrowers do not have to overpay for insurance policies that are already very expensive?
Elvira NABIULLINA:
You are right in formulating this question: people should not overpay for services that provide no consumer value.
The issue you are asking about is actually a long-standing problem, but it must be said that the situations is gradually improving. This is clear from the complaints statistics: the number of complaints about borrower insurance is down by a third.
A number of banks are increasingly tightening quality standards for their insurance products they accept as loan collateral. These requirements include broad insurance coverage with a minimal list of grounds for claim denial. People complain about claim rejections and the long list of grounds for denials. It is important that this effort aims to minimise the number of reasons why insurers may deny claims; no less significant is a more rapid procedure for claim settlement. We can see this constructive attitude in the case of some banks. This gives us reason to expect that other banks will be also increasingly offering insurance products on reasonable terms, as banks compete for their customers.
Another development I would welcome in addressing this issue is an initiative from market players themselves to develop a standard at the level of a self-regulatory organisation. We have even provided our suggestions regarding the structure and content of such a standard, but it is to be adopted by a self-regulatory organisation. Its focus would be precisely what I mentioned: reducing grounds for claim denials and eliminating the imbalances between agent fees and insurance premiums. We hope that market players present a draft of this standard by the end of the year.
QUESTION from Expert:
On the one hand, the Bank of Russia supported the decision to raise the VAT rate and thus reduce the budget deficit. On the other, you admit this decision is proinflationary (and you have spoken about this today), although it comes with a one-off effect.
At the same time, nothing suggests this will mean a more relaxed attitude of the Bank of Russia as regards the target. Is there a contradiction here? What is the Bank of Russia’s assessment of the risk that tax expectations might already pass through into prices and wages this year, adding to inflationary pressures even before the tax increase?
Elvira NABIULLINA:
True, we have stated this before, the short-term impact of tax increases may be proinflationary. But in the medium term, a tax increase is far more preferable to an increased budget deficit, and an increase in borrowing. The alternative would be more proinflationary and more long-lasting. Therefore, this is the preferable option, in our view.
As for the VAT rise, before long, we will see it pass through into prices and the scale of the increase. However, going by 2019, most of the effects will occur in December and January.
QUESTION from Bi-Port, Murmansk:
Some experts claim that the high key rate held over three years has put the country on the brink of crisis, and the economy is in a deep cooling, not overheating, state. What do you say to them?
Elvira NABIULLINA:
We disagree with this point of view. An overly cooling economy comes with a rise in unemployment and a drop in real wages. This is not the case in fundamental ways. Our unemployment is at a record low, and wage growth is high and ongoing.
I admit there are industries marked by plummeting demand, primarily export-oriented industries. But the essence of problems in these industries is in a completely different plane, other than the key rate. A drop in employment and lower capacity utilisation in these sectors is not a sign of overcooling as long as unemployment is record-low.
To be fair, let us talk numbers. You may remember that the average key rate in 2022 was 10.6% and GDP fell 1.4%. In 2023, the key rate was about the same at 10%; growth was 4.1%. In 2024, the average interest rate was 17.5% and growth totalled 4.3%.
I do not mean to say there is no relationship between the key rate and growth, and inflation; however, it is much more complicated than some experts believe. A low rate can put nominal demand into overdrive, to any level. But if there is no spare labour, the only apparent result of demand thus accelerated in defiance of production capacities and inflation will be nothing but runaway inflation.
QUESTION from Market Power project:
How can the Bank of Russia explain the visible difference between growth in ruble money supply (M2) and broad money supply (M2X) in September?
Alexey ZABOTKIN:
First, monetary aggregates are best analysed over longer horizons than one month to obtain a clearer picture of how monetary aggregates impact demand and inflation.
As regards the September statistics, the structure of broad money growth sources was to a large extent driven by the so-called net foreign assets of credit institutions. In terms of the components of money supply, foreign currency deposits of corporates increased. What does this mean? The fact that in September Russian banks saw an inflow of corporates’ foreign currency deposits, previously held abroad in foreign banks.
Elvira NABIULLINA:
This includes [foreign currency inflows] in anticipation of foreign debt repayments.
QUESTION from Pro.financy project:
Analysts, including in major banks, assume that once the special military operation is over, the ruble may well strengthen up to 50 and even 40 against the dollar. Meanwhile, the Ministry of Economic Development considers any rate below ₽75 a strategic threat and a clear risk to the budget. Does the Bank of Russia view this as a real threat or rather an economic benefit?
Elvira NABIULLINA:
Any scenario assuming an improvement in the external environment is disinflationary. This will lead us to reduce the key rate faster. The ruble would adjust to this, but would most likely be stronger in such a situation.
Alexey ZABOTKIN:
What is an improvement in the external environment? This means that we can buy more imports for our exports, all other things being equal. This also means that the economy is in a position to operate with a higher level of aggregate demand since it can satisfy more of it through imports without accelerating inflation. In this sense, it is really a disinflationary factor. The key rate may be lower since higher aggregate demand would be permissible.
QUESTION from Interfax:
The Central Bank has revoked a licence from Tavrichesky Bank, one that was under resolution. Why do you think its ten-year resolution failed? Is it the resolution authority’s fault? How can you comment on its capital shortfall of ₽135 billion, which is on the order of Jugra Bank’s record?
Elvira NABIULLINA:
The capital shortfall of this bank resulted from a combination of objective factors. Among them are the consequences of the bank’s business model having been linked to Eurobonds. This business model was not risky until 2022, but then sanctions caused a negative revaluation of the securities portfolio, which mainly included the Ministry of Finance’s Eurobonds.
Speaking of the shortfall and the possibility to meet creditor claims in the first place (this is our primary concern), our assessments show that the bank’s assets, if sold in a liquidation procedure, will fully satisfy claims of first- and second-priority creditors. The Deposit Insurance Agency is to begin payments to the bank’s creditors once the register of creditor claims is closed in January 2026.
QUESTION from Moskovsky Komsomolets:
Does the Bank of Russia calculate the impact of geopolitics on the ruble exchange rate? The fact is, the ruble’s October performance was paradoxical. For example, it strengthened early in the month, when there were no positive news and there was talk of Tomahawks. At the same time, news of a potential Putin and Trump meeting in Budapest and talk of joint infrastructure construction in Alaska sent it lower. Is there a relationship, and can it be somehow calculated? What would you advise investors and Russians?
Elvira NABIULLINA:
I can reiterate what I have said and perhaps elaborate. The exchange rate is under the influence of several fundamental factors such as exports, imports, and capital flows. You can see their dynamics. There is also the monetary policy stance, which helps a stronger ruble. There are also short-term factors, however.
Admittedly, the exchange rate has become more volatile and may respond to them in absolutely different ways depending on the combination of these factors.
Alexey ZABOTKIN:
I would also like to highlight that the exchange rate is fluctuating in a relatively steady range.
Elvira NABIULLINA:
Yes, indeed, we need to look at longer periods rather than short-term fluctuations; the fluctuations have been within a certain range.
Alexey ZABOTKIN:
The current range has held for almost six months, since May, and this is the lower bound on the exchange rate range for the past two years, since the middle of 2023, ‘lower’ being understood in terms of the ruble value of the dollar.
At this point, I will allow myself to repeat once again the thought we always bring back. If our monetary policy focused on low inflation, it automatically protects the purchasing power of the ruble, not only in relation to goods and services, but also relative to other currencies, allowing for strong external shocks that can trigger changes. Overall, a steady exchange rate results from a policy aimed at low inflation, and only so.
QUESTION from RBC:
The cooling-off rule for loans is in effect from 1 September, and beginning from 1 October, users can report fraudsters in banking apps. Does the Bank of Russia have a preliminary efficacy assessment: how many users of the new feature are there, has it worked in general?
Elvira NABIULLINA:
By all means, we will monitor the efficacy of these measures. At this point, we are not ready to provide quantitative assessments, and we will certainly present them when they are available.
QUESTION from Market Power project:
In recent months, we have seen some growth in foreign currency loans. The Bank of Russia has repeatedly said that growth rates in lending is an important indicator. Theoretically, a longer period of a high key rate could spur demand for foreign currency loans. How does the Bank of Russia view this factor?
Elvira NABIULLINA:
We do not see this as a pronounced trend. For borrowers to prefer ruble loans over foreign currency loans, inflation indeed needs to fall faster, and this will also push rates on ruble loans down. This is the focus of our policy.
However, there is no systemic problem of a switch from ruble to foreign currency lending. We saw an acceleration primarily in ruble lending in the last summer months, on the back of accelerated corporate lending.
QUESTION from Frank Media:
Deputy Finance Minister Alexey Moiseev has recently said that about 60% of new participants in the Long-term Savings Programme were pre-retirees and retirees. Is there a misselling problem here that needs regulatory attention? After all, this product as given was probably not initially meant for pensioners.
Elvira NABIULLINA:
We have not identified any misselling so far. We will certainly monitor this. However, it seems to me that older people tend to have greater awareness and understanding of their need for long-term savings, including for old age. This is probably even a natural phenomenon. We will be highly attentive to any imbalances, but we have found none at this moment.
QUESTION from Rossiyskaya Gazeta:
Until recently, the housing market held high hopes for the key rate falling to about 10% next year or even lower, which would make mortgages more affordable. These hopes have now diminished. Please, might there be disruptions in the housing market next year, perhaps even bankruptcies among developers, if the rate does not decline as rapidly as the market would like?
Elvira NABIULLINA:
There were no grounds to expect a 10% rate. We had published forecasts for the average key rate. It was 12–13% last time, and it has been revised upwards since.
My point is, the housing market is now showing greater dynamism; admittedly, the share of market-based mortgages is rather small, but even they have switched to growth in response to easing monetary conditions.
Regarding financing for developers themselves, for example, there is an escrow account mechanism, enabling them to receive loans at relatively low rates – about 10–11%.
Mortgage lending is also recovering, and more: the proportion of deals without mortgages and instalment sales are up from a year earlier. Having said that, the share of instalment sales is declining slightly. Mortgage lending has been growing in recent months by nearly 1% over the past month. In our view, these are balanced growth rates for the mortgage market.
Thank you.