cross-posted from: https://lemmy.sdf.org/post/44896836

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The Russian Central Bank has cut the key interest rate again from 17% to 16.5%, as most experts had predicted. The cut is symbolic: the Central Bank itself doesn’t even hide that it was forced into it. The main question now is whether this is a one-off concession or the regulator finally caved in to government pressure.

For now, it looks more like the first option. But the second cannot be ruled out.

[…]

The Central Bank’s chair, Elvira Nabiullina, said that the board discussed three options: keep it at 17%, cut it by half a percentage point to 16.5%, or cut it by a whole point to 16%. But Nabiullina’s remarks were as contradictory as the press release:

“The situation is developing overall within the bounds of our forecast. Monetary and credit conditions remain tight, which creates prerequisites for lowering inflation. Therefore, we decided to continue easing the policy. At the same time, since the last meeting, substantial inflation risks have materialized.”

Put simply, the Central Bank expected that inflation would resume its rise after the usual seasonal drop in August–September, understood that only tight monetary policy prevents it from running wild, and therefore is easing policy in light of new inflation risks. And Nabiullina, without batting an eye, lists these risks: a widening budget deficit, rising fuel prices, higher taxes.

And she is absolutely right. Moreover, none of these risks can be considered short-lived; there is no understanding of when these risks will not only disappear but also diminish.

[…]

You can’t explain the contradiction between the Central Bank’s words and actions with economic factors. But you can easily explain it politically. The draft federal budget for 2026 and for 2027-2028 clearly shows that revenues have no chance of matching expenditures. Expenditures have been cut to the minimum — the barest social spending so people won’t revolt, investments delayed or reduced. It’s all war, all hardcore — there’s no time for indulgence now.

[…]

As a side note: Russian Central Banker Elvira Nabiullina wanted to resign in early 2022 over Russia’s invasion of Ukraine, but Putin rejected Nabiullina’s bid.