It is impossible to refuse to increase the key rate, as this could harm the country’s economy. This statement was made by the Chairman of the Central Bank of the Russian Federation, Elvira Nabiullina.
According to her, the potential of the economy is determined by labor resources, as well as the technologies and capacities that the state has at its disposal. Stable high inflation indicates that the economy is deviating from this potential and that it is not keeping pace with the growth in demand.
“If we turned a blind eye to high inflation and did not tighten monetary policy, it would only harm the economy.”she added during the press conference.
The head of the Central Bank compared an overheated economy to a fast-moving car. In this situation, the country will “move” quickly, but not for long.
Nabiullina also noted that an attempt to grow faster than the potential, due to a soft monetary policy, could result in an increase in prices. This, in turn, will lead to savings and wage growth. As a result, citizens will not receive a real increase in well-being.
