Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 21 March 2025
Good afternoon. Today, we have made the decision to keep the key rate at 21% per annum.
Current price growth rates are going down gradually, which is largely the result of the Bank of Russia’s restrictive monetary policy. The slowdown in inflation has also been promoted by improved sentiment in the markets and a stronger ruble. Nevertheless, price pressures remain high and inflation expectations are still elevated. Hence, we need to maintain tight monetary conditions for a long period. Our further decisions will depend on how fast and sustainably inflation is decelerating and whether this is sufficient to bring it back to 4% in 2026. If not, we may additionally raise the key rate, although the probability of such a move has decreased.
I would now dwell on the reasons behind our today’s decision.
Firstly, inflation stays high.
To a great extent, the high rate is explained by persistent demand-side pressures, which is most obvious from the underlying measures of inflation. Although core inflation is decelerating, it stays close to 10%.
At the same time, current price growth has been gradually slowing down since the beginning of the year. And while price growth remains high in services and the food segment, non-food inflation has decelerated to moderate rates. In the first place, this slowdown has become evident in the segment of durables, namely cars, household appliances, and furniture. Prices in these categories are most responsive to monetary policy and the exchange rate. A reduction in sales in these segments, which is confirmed by recent monitoring of businesses, also proves the effects of monetary policy. Companies report a rise in the stocks of electronic devices and cars. In other words, retailers expected higher demand than is currently observed.
Alongside our monetary policy, price dynamics have also been affected by a stronger ruble. Further developments in the foreign exchange market will depend on actual changes in the external environment. It would be now premature to draw any conclusions about how strongly this factor might influence future inflation dynamics.
Households’ inflation expectations have continued to trend downwards in March, decreasing to 12.9%, which is the lowest level since last September. The decline in companies’ price expectations has accelerated. However, inflation expectations are still elevated, which is preventing inflation from decelerating faster.
Secondly, the economy.
At the beginning of the year, economic activity slowed down slightly compared to the end of 2024. This is in line with our February forecast.
Nevertheless, consumer activity remained high in January, additionally driven by a faster increase in wages at the end of 2024. This acceleration was associated with earlier bonus payments that some companies made in December 2024 instead of 2025 Q1 due to tax changes. This is why it will only be possible to assess wage dynamics more accurately after we receive the statistics for 2025 Q2. Preliminary data on consumption in February and March are mixed.
There are the first signs of a moderation in investment demand. In particular, we have been recording a reduction in sales of freight vehicles and the demand for construction materials. Increasingly more companies are postponing their investment projects. Nevertheless, they do not suspend the projects launched earlier, which is possible due to the profit accumulated over previous years, among other things. As of the end of 2024, companies’ profits declined. However, compared to historical levels, the amount of profit is rather high both in the economy as a whole and in most of industries. Now, this profit may be a source of financing for current investment projects.
The labour market remains tight, although there are now more signs of decreasing labour shortages. This is confirmed by recent monitoring of businesses. In addition, the number of CVs per one vacancy has been growing.
The signs of a moderate slowdown in domestic demand growth and a gradual easing in the labour market indicate that the economy is rather on a soft landing path, without sharp fluctuations.
Thirdly, monetary conditions.
Price monetary conditions have eased slightly, whereas non-price conditions have remained tight. Yield curves in the money market and the government bond market have shifted downwards, affected by market participants’ expectations of a possible improvement of the geopolitical situation. Furthermore, nominal interest rates in many segments have notably decreased. However, considering the simultaneous decline in inflation expectations, monetary conditions in real terms have changed not that significantly.
Lending amounts have changed more substantially in both the retail and corporate segments. The slowdown has been most pronounced in consumer lending, primarily in unsecured lending. Corporate lending has been expanding at a moderate pace, but its dynamics have been noisy due to elevated budget expenditures at the beginning of the year. Many companies use the funds received from the budget to repay the loans raised earlier. Overall, lending growth rates are close to the lower bound of our baseline forecast.
In recent months, lending growth rates have been notably below last year’s peaks. However, this cannot be interpreted as a continuing tightening of monetary conditions because demand is affected not only by lending but also by budget payments. I would like to remind you that the resulting indicator characterising the combined effect of credit and budget funds is money supply. In February, its expansion slowed down, albeit not as appreciably as in lending, which was because budget expenditures remained high.
I would briefly talk of the budget. Budget expenditures were elevated in January and February. As was explained by the Ministry of Finance, that was associated with earlier financing of expenses and advance payments under government contracts at the beginning of the year. The Ministry of Finance is nonetheless determined to decrease the structural primary deficit to zero by the end of 2025, which implies a gradual deceleration of budget spending to the seasonal norm in the coming months. We take into account these plans and assume that the budget will have a disinflationary effect this year.
Now, I would like to speak of external conditions.
Export dynamics have been rather stable in recent months, whereas the expansion of imports has been decelerating due to restrictive monetary policy. As a result, the surplus of the balance of trade has increased, which, among other things, has strengthened the ruble. Overall, ruble assets have become more attractive owing to sustainably high yields in rubles and a more positive estimate of geopolitical risks by market participants. Nevertheless, it would be premature to predict how stable the changes in external conditions will be.
As regards risks to the baseline scenario.
The balance of risks has generally remained unchanged, with proinflationary factors prevailing. In the first place, these are risks associated with the labour market and inflation expectations. As to disinflationary factors, this is the risk of a more considerable slowdown in lending.
The principal area of uncertainty is the external environment as its further changes might have both proinflationary and disinflationary effects. Proinflationary factors include growing protectionism. A disinflationary effect is possible if geopolitical tension eases and sentiment in financial markets improves sustainably.
Winding up, I would like to comment on our future decisions.
Further developments are highly uncertain, including external conditions being one of the reasons for that. We can see that market participants’ expectations and sentiment are affected by the revision of their assumptions about a possible improvement of geopolitical conditions. Nevertheless, we build our monetary policy on sustained trends, fundamental factors, solid facts and a conservative approach to risk assessment. It is crucial to stick to this approach to confidently bring inflation back to 4% in 2026, regardless of further external developments. According to our estimates, current inflation trends require a long period of maintaining tight monetary conditions. If we need to raise the key rate to be able to return inflation to the target, we will be ready to do this, although the probability of such a move has decreased.
Thank you for attention.
Q&A FOR THE MEDIA
QUESTION from TASS:
Did you discuss any arguments for a rate reduction today, in addition to the other options? When is a monetary policy easing due?
Elvira NABIULLINA:
No, we did not discuss a reduction today. Rate reduction cannot begin until we see inflation declining sustainably and at a pace that enables it to return to 4% in 2026.
QUESTION from Fomag.ru:
If you read the analytics and consider your decision, it feels like the 21% rate has done everything it can to bring inflation to target, and you have said that the target will be achieved by 2026. Is it possible to say – simply stated – that the 21% interest rate may last until 2026? Is this too much of simplification? What else should be remembered here – or is this the right understanding?
Elvira NABIULLINA:
Everything will depend on how the situation develops. We really are seeing a weakening in current inflationary pressures, but it is happening under the influence of factors that are either sustainable or short-lived. We need to make sure that inflation is declining steadily.
If we see inflation risks materialising, a rate increase may be necessary. There is considerable uncertainty.
Our current position is that monetary conditions are sufficiently tight, but we are ready to raise the rate if needed. Our estimate for the average rate this year includes both scenarios. A reduction in the rate is possible should the circumstances permit, but a rise is not ruled out. Remember that the range of the average key rate for this year is
QUESTION from Anna_finance project:
We are all very happy to see the ruble strengthening. My question is as follows. The dollar exchange rate at commercial banks tends to be much different from that of the Central Bank and the interbank market. Is the Bank of Russia planning to set a cap on the difference in the exchange rates offered by commercial banks?
Elvira NABIULLINA:
We have no plans to that effect. We believe that we had better stay out of the way banks run their exchange rate operations. Otherwise, the banks could lose money in that business and struggle to meet customer demand.
I will note that the rates at the exchange offices have always been different from the exchange rates in interbank transactions, which determine the official exchange rate. The exchange rate differences really increased when wholesale supplies of foreign currency stopped in 2022.
Another point to note is that these spreads usually grow on the back of elevated volatility. A decline in market volatility generally pushes the spreads down. The spreads also shrink under the influence of competition among banks.
We are not planning any special action, interference in pricing or, essentially, regulation.
QUESTION from RIA Novosti:
The rate has not changed for a very long time, but we have recently noticed (and so has the Central Bank) that banks are beginning to cut deposit rates. What is behind this in your opinion? Bank of Russia data show that average weighted deposit rates were above 22.8% in December but are only just above 20% at the moment. What is behind this in your opinion?
Elvira NABIULLINA:
It is generally a non-standard situation when deposit rates exceed the key rate. We seem to have come back to a normal ratio between deposit rates and the key rate.
One reason why deposit rates were above the key rate in November—December is that the banks expected a further monetary tightening, a further increase in the key rate. Another reason is tighter banking regulation. However, we can see that these spreads declined on the back of a change in market players’ expectations about the key rate. A further driver of this decline is the revised schedule for banks’ compliance with the liquidity ratios (they had a need for this liquidity).
This is why we believe that the situation can be called more or less normal now.
QUESTION from Sovetskaya Chuvashia, Cheboksary:
How is the Bank of Russia’s key rate policy aligned with the Government's efforts to support economic growth?
Elvira NABIULLINA:
While the Central Bank makes its key rate decisions independently, the Bank of Russia and the Government work together to ensure sustainable economic development and promote welfare. We are in constant contact with the Government, exchanging information and forecasts. Still, we have our own tasks and tools, and we make decisions independently, as I have said.
The Government has tools to deliver on national development goals, including regulatory measures such as reducing administrative barriers and structural policies. The budget is another tool, and a very powerful one. The Government relies on fiscal stimulus to support critical industries and enterprises, and it makes decisions to raise labour productivity. The use of this toolset has intensified.
As regards the Central Bank, its monetary policy is focused on demand. Our objective is to regulate demand so that it matches growth in production capacities and to prevent the translation of demand into accelerated growth of prices.
We can see that demand is now delinked from supply, and we need to slow it slightly to help the supply of goods and services catch up so that they both continue to grow steadily and in a balanced manner without bringing accelerated inflation.
Speaking of coordination with the Government, I must mention that a reduction of the budget deficit and a more restrained approach to subsidised programmes are planned for this year. This will help contain demand and inflation.
QUESTION from Rossiyskaya Gazeta:
The Bank of Russia traditionally pays great attention to the inflation expectations of households and businesses. Do you think it is possible to anchor inflation expectations to the 4% target after the increase in the volatility of the ruble in recent months?
Elvira NABIULLINA:
Certainly, the exchange rate impacts inflation expectations. It is a critical factor. However, inflation expectations do not automatically track the exchange rate. There are other factors at play, such as the real prices that people see in shops and current inflation. There are what are called ‘marker’ goods – we have discussed them before – which come into people’s view and shape their ideas about future price growth.
True, we can see that the exchange rate is unfortunately more volatile than in 2022, including due to the sanctions. Volatility – even more than exchange rate dynamics – is certainly not a factor that reduces inflation expectations.
What I want to stress is that the lower inflation, the more stable the exchange rate. Therefore, sustainably low inflation, when we have it, will help us stabilise the exchange rate.
ALEXEY ZABOTKIN:
You are certainly right in saying that the strong volatility of the exchange rate complicates the stabilisation of inflation expectations. But I would like to note that if we look at more than
It is therefore too early to speak of any systemic weakening or strengthening of the ruble. The significant exchange rate fluctuations are associated with very volatile external conditions, but given these volatile external conditions, the exchange rate is in fact relatively stable.
QUESTION from Kommersant:
You have spoken about the impact of the fiscal channel, faster advance payments and payments for government contracts on the growth of the M2 money supply. How important is this factor for the Bank of Russia now, and are you in discussions with the Government about the possibility of limiting this advance financing? When is this effect set to fade? If you are talking about demand in the second quarter, what is the timeframe here with regard to the budget?
Elvira NABIULLINA:
There are several aspects to the impact. Over a short-term horizon, this advanced, expedited, fiscal spending may make a further contribution to a rise in inflation. That is if we are speaking of the short-term effects.
As regards the medium-term path of inflation, it is not the progress of intra-year spending that is of more importance to us but whether the budget is to be executed as planned and whether the overall and structural budget deficits remain within the approved amounts. In our forecasts and inflation projections, we assume that this year’s budget will have a disinflationary effect thanks to the shrinking structural deficit.
This is why the rollback of advance financing is not being discussed with the Government. Moreover, advance financing is probably needed to support the development of certain businesses.
Having said that, we should remember that demand in the economy begins to arise not when money is allocated but when state contracts are signed and the recipient companies can spend the money. They can take out loans on the understanding that the budget will pay for these liabilities. But demand arises when they begin to fulfil state contracts. However, we also factor in these short-term effects.
I would like to stress once again: it is critical that the Ministry of Finance remains committed to bringing the structural primary deficit to zero by the end of this year.
ALEXEY ZABOTKIN:
As you presume in your question, the flip side of advance budget funding is less need for government contractors to borrow.
Therefore, this does not really affect aggregate demand since it is shaped by general budget expenditures and purchasing plans as part of public procurement. In terms of monetary aggregates, this advance financing is the flipside of slower growth in corporate lending. At a first approximation, this really does not affect the inflation forecast.
QUESTION from Bloomberg:
A recent presidential directive grants approval for a US hedge fund to buy back the shares of several Russian companies. Unfortunately, the authorities have not commented on the matter. Why has Russia – after several years of restrictions – allowed foreign funds from unfriendly countries to sell Russian securities? What amount are we talking about? Are you seeing more interest from non-residents in the Russian market?
Elvira NABIULLINA:
We do not comment on specific deals and their parameters. The President makes decisions on them based on financial and economic feasibility.
As for non-residents’ interest in Russian assets, there is no reliable data at the moment to suggest signs of interest. But admittedly, the subject is being widely discussed. There are objective reasons for this interest, such as the interest rate, the yield and the difference between investments in Russian and foreign assets. However, the interest is undoubtedly held back by capital controls and sanctions. We will monitor the situation as new data emerge.
QUESTION from NTV’s Delovye Novosti:
I notice that the longer the high key rate holds, the more there are memes, jokes and parodies of you on this topic. The latest example is a parody about you attending a class reunion. What is the Bank of Russia’s and your personal attitude towards this: positive, as a kind of education in the field of monetary policy, or negative, considering that this is no laughing matter?
Elvira NABIULLINA:
I am okay with it, especially when a joke is funny. Yes, I am absolutely fine with it.
QUESTION from Interfax:
How sustainable are current trends in lending? Is this factor of less concern than before? You have said that macroprudential regulation is more about stability and capital rather than lending. Many banks are now warning that they will struggle to maintain capital adequacy this year. Are you currently considering reducing any buffers? Are you thinking about going back on the rise in the countercyclical buffer in July?
Elvira NABIULLINA:
Speaking of the sustainability of current trends in lending, most of the slowdown has occurred in the retail segment, and since last November, if I am not mistaken. This trend is fairly stable.
Speaking of corporate lending, as I have said, we can see that the growth rates have become much more moderate than the very high rates of last year, but the data remain very noisy because of the effects of advance budget financing.
Therefore, we are waiting to become more confident about stability in corporate lending until we have Q2 data.
With regard to capital adequacy and macroprudential buffers, our macroprudential regulation aims to prevent banks from accumulating risks, and this involves the use of limits and buffers discouraging high-risk loans.
Second, add-ons, and not limits, involve the buildup of an additional capital buffer. There are no plans for a systemic reduction in these add-ons. Even if lending grows more slowly, it will have to be addressed through the key rate, rather than the macro add-ons, whose intended use is different.
As for the countercyclical buffer, we will monitor the situation, but so far we do not intend to change our plans. More so, we believe that the countercyclical buffer should be positive in quiet times as well (not only at times of overheating credit demand) and bring about the accumulation of capital buffers.
QUESTION from Dengi Ne Spyat channel:
You have mentioned high demand for government bonds. We are seeing this in the growth of the index, and market players also agree that non-residents are taking considerable interest in our stock market. The latest review of financial markets mentions that non-residents are participating in Ministry of Finance bond auctions. However, assuming that such a positive view of receding geopolitical risks is premature and that non-residents may well show indifference or disappointment, does this involve sell-off risks from non-residents? What implications will it ultimately bring for Russia’s public debt market?
Elvira NABIULLINA:
We see no such risks at the moment. The interest, if it exists, has yet to become tangible. We have yet to see the data. We are not seeing any financial stability risks in the growing demand for government bonds, given that such demand in the primary and secondary on-exchange markets is originating from a wide range of market players, including banks and institutional and private investors.
The interest is driven not only by geopolitical expectations but also by signs of a slowdown in inflation and inflation expectations. A certain adjustment is definitely possible, but we can see no major risks here.
QUESTION from Elakhovsky YouTube channel:
Today’s press release says that the upward deviation of the Russian economy from the balanced growth path remains considerable. Could you give us a percentage estimate for this deviation? Overall, what is the path of balanced economic growth, in the Bank of Russia’s view? What is the extent of the deviation at the moment? Does the output gap you have discussed many times still remain? What is it as a percentage of GDP, and how will it change over the next year? Do you perhaps intend to share such estimates regularly?
And another question, please. Is an extraordinary, emergency, policy meeting possible if there is substantial progress with the Ukraine negotiations to the point that an agreement that suits everyone is signed? Assuming the theoretical possibility of such an emergency meeting, by how much might you reduce the rate?
Elvira NABIULLINA:
As for the first question about the output gap, we have said on many occasions that it is rather difficult to measure, and we do not publish such estimates. For us, the indicator of the output gap and its dynamics are the dynamics of inflation, which signal overheating or cooling. The above-target inflation is evidence, an indicator, that the gap remains. However, the current decline in inflation expectations may suggest that the output gap is gradually shrinking.
Speaking of unscheduled meetings, if they are unscheduled, nobody announces them in advance. I can hardly say anything more. We are not seeing any preconditions for an unscheduled meeting in the near future.
ALEXEY ZABOTKIN:
All the decisions that could have been made based on currently available information were indeed made at today’s meeting.
QUESTION from Russia 24:
The United States has made a statement that it is close to lifting the sanctions on Russia. How do you think may this impact the unfreezing of Russian assets?
Elvira NABIULLINA:
It seems to me that it is too early to discuss this topic. I am not aware of any specific actions or discussions of this matter.
QUESTION from RBC:
On March 18, when Vladimir Putin and Donald Trump had a phone call, there were two rather strong jumps in the Russian stock market in the evening session. There was a significant drop in the index but then a quick bounce-back. Was the Bank of Russia monitoring this, and do you see a need for an analysis for manipulations, insider trading and other unfair practices? In current conditions, given the news landscape, do you see any risks in the less liquid morning, evening and weekend sessions?
Elvira NABIULLINA:
We see no risks, and we are constantly monitoring the situation.
As for the first part of the question, we are analysing the developments. Should facts of misconduct be identified, we will take measures consistent with our mandate. However, we cannot confirm, for example, that all the selling transactions were made by one entity.
The candlestick chart of exchange trading shows price fluctuations, but it does not suggest that one entity was wholly responsible for the sales. In this case, it was the result of different selling transactions in the market. We are therefore continuing our analysis of the situation.
QUESTION from Reuters:
Could you tell us which options for the key rate were on the table today? And a second question, please: Do you think a stronger ruble is a risk for the federal budget?
Elvira NABIULLINA:
The question about the options normally comes first. Apparently, the answer was mainly clear to you this time. We only discussed keeping the key rate unchanged, but we took a long time to discuss the signal related to the decision.
As for the impact of a stronger ruble, first, the exchange rate can only make a meaningful impact if its movements are sustainable. It is currently too early to argue that they are.
As for the budget, it is up to the Ministry of Finance to say. We need to analyse the cumulative effect in terms of both revenues and expenditures, considering that a stronger ruble, all other things being equal, is essentially a disinflationary factor.
If the ruble strengthens steadily, this may bring, all else being equal, an easing of monetary policy and lower interest costs for the budget. In the case of the budget, different channels of influence should be analysed.
We at the Bank of Russia are primarily focused on the impact of exchange rate changes on inflation. As I have said, a sustainable strengthening of the ruble is a disinflationary factor, but it is too early to talk about that.
QUESTION from Kurskaya Pravda:
Media reports say that many foreign brands are planning to return to the Russian market. This will likely affect the supply of goods and services and will lower inflationary pressures from demand. Did the Bank of Russia take this factor into account in its key rate decision? If yes, can it be viewed as a condition for monetary easing?
Elvira NABIULLINA:
No, we did not take that factor into account, as it is only a hypothetical possibility. Indeed, the hypothetical return of brands could lead to systemic and sustainable improvements in the terms of trade alongside lower costs for imports. These improvements would be disinflationary provided that not only imports but also exports expanded. Otherwise, growing imports with flat exports would lead to a weakening of the ruble, driving price growth.
Let me reiterate. We view the scenario you have described as a hypothetical possibility. Our scenarios assume that the current level of sanctions pressure will remain. When sufficient grounds emerge, we will adjust our forecast, including the projected path of the key rate.
QUESTION from InvestFuture project:
It has been reported that the Bank of Russia supports cryptocurrency trading, but only for super-qualified investors. I wonder what is behind this change in the regulator’s stance. What is your opinion about ordinary individuals having access to cryptocurrency trading on foreign platforms?
Elvira NABIULLINA:
Well, our attitude towards cryptocurrencies has overall changed only slightly. We believe that these instruments are highly volatile and often used to conduct non-transparent operations. However, the time has come to move forward and make another step in building a regulatory environment that enables super-qualified investors to make cryptocurrency investments in the Russian market.
But why super-qualified investors? We believe that these are high-risk investments, and we suggest running an experiment first that will help develop standards, enhance transparency and confirm the feasibility of the admission of qualified investors. We could identify any need for potential changes while we are in experimental mode.
Our position is unchanged in that cryptocurrency must not be allowed as a means of payment. Therefore, we propose that a simultaneous ban be introduced on cryptocurrency settlements between residents outside of the experimental legal regime. The introduction of the ban would come with statutory consequences for violations.
QUESTION from Economical Telegram channel:
To begin with, I would like to say that Mr Zabotkin was right: prices for flowers had returned to normal by 15 March.
My question is as follows. You have said today that under the baseline scenario, the Russian economy is approaching a so-called ‘soft landing’. Could you please describe this soft landing? Would it mean low inflation, a victory of tight monetary policy, but without a crisis in industrial production or growth in unemployment?
Elvira NABIULLINA:
It would really be a significant decline in inflation to our 4% target in 2026 accompanied by positive growth. As a reminder, we expect GDP to grow by
QUESTION from Moskovsky Komsomolets:
You have mentioned today that the sanctions pressure remains in your baseline scenario. But in the light of the US—Russian thaw, there is talk already, including at the highest level, about the possible lifting of the US-imposed sanctions. In this context, there is discussion of the possible lifting of the sanctions against MOEX, the launch of dollar trading in the next six, nine or 12 months and even a return of Visa and Mastercard. Does the Bank of Russia consider such scenarios over such long periods? Should all this come to pass, how will it affect the financial system in the context of the dedollarisation of the Russian economy?
Elvira NABIULLINA:
I would rather repeat what I have said: we are prepared to consider this a scenario to take into account in making our decisions only if there is firm confidence [in this course of events], that is, that it is a fundamental rather than a hypothetical [possibility].
As far as the financial sector and system are concerned, it will have a disinflationary impact – if it materialises.
Now on to our dedollarisation policy. We had begun it before all these sanctions were imposed, on the understanding that the foreign exchange risk for the overall financial system should be reduced, and we began to do it for the banking system.
As for international payment systems, we are not against competition with international payment systems, but we are guided by our strategy, which we undertook many years ago, of building our own, competitive national payment infrastructure, and we are committed to this course.
QUESTION from Vestnik magazine, Rostov-on-Don:
My question is about the standard for protecting mortgage borrowers that has come into effect this year. Certainly, it is a critical document to make mortgage loans more transparent. However, certain experts fear that it may reduce the affordability of housing and lead to an even greater cooling in the real estate market. How strong are such risks, in the Bank of Russia’s view? Are there any plans to make this recommended mortgage standard mandatory in the future?
Elvira NABIULLINA:
We believe that the standard is very important. We had worked with market participants for a long time before it was passed. As an important element, the standard bans the commissions that developers pay to banks and then include in property prices. These commissions reduce transparency and deceive buyers so that they end up buying housing at inflated prices.
According to our estimates, such schemes account for about
In the primary market, 90% of mortgages are issued under government support programmes, under which the rates are already low. We are aware that developers and banks can stimulate sales through various schemes, but we are against making these schemes legal or postponing the implementation of the mortgage standard. Why? We are utterly against supporting demand for homes and for mortgages to the detriment of borrowers’ rights and interests. We believe that is not the right approach.
We have explained it several times: imagine that a person has to sell a flat bought at an inflated price, but the money from the sale may not be enough to settle the mortgage debt. This borrower will owe the bank their mortgage but will be left without the flat.
In response to the second part of the question, I can say that the standard is already mandatory for banks. However, there are no effective sanctions for violating the standard. What is called the supervisory standard, which includes sanctions, takes effect on 1 April. More so, the sanctions may seem soft: the name of the offending bank will be published on a website. While this will certainly be a signal for buyers, if violations are systemic and the sanctions are not working, we will tighten the regulation.
We have made it clear that we want a standard for mortgage products that is transparent to people in specifying a fixed interest rate and a clear schedule of payments. For all mortgage loans that are at odds with this standard, we are ready to impose higher requirements on banks in terms of risk weights and loss provisions, to financially stimulate banks to issue only standard, transparent products. However, we will monitor the situation, especially after the supervisory standard takes effect.
QUESTION from Bitkogan project:
Suppose that by the next meeting the ruble has remained strong. Would it be reasonable to consider the strengthening sustainable?
Elvira NABIULLINA:
The fact of the ruble being strong is probably not enough evidence of a steady trend. A steady trend in the exchange rate will emerge if the external conditions that have resulted in the ruble’s strengthening are sustainable.
ALEXEY ZABOTKIN:
To argue that the external conditions have actually changed, they must change. The market has already priced in its expectations of changes.
QUESTION from Nezavisimaya Gazeta:
According to increasingly more businesses, the high key rate is really suppressing demand-pull inflation. At the same time, businesses claim that the high key rate is triggering supply-side inflation and inflation of interest and lending costs. Is it possible now to quantify how much the high key rate takes away from inflation due to subdued demand, and how much it adds because of these interest costs? What is this proportion like in numbers?
Elvira NABIULLINA:
Indeed, businesses often talk about this. Such calculations could be made easily if any company could easily pass its costs on to prices, including interest payments and others. Then we could say that a certain part of the price growth comes from interest payments. But life is much more difficult.
Those who claim that high interest rates accelerate inflation probably assume that businesses can pass any increase in interest payments to their prices, but that is not quite so. Companies cannot automatically pass any costs on to prices. They can pass them through only to the extent that demand permits.
The pass-through can vary greatly for different goods and services. For example, the price elasticity of demand for everyday goods is not very high. However, a lot depends on competition. That is, businesses that can afford lower prices may increase their market share and do not have to pass all their costs on to prices.
Therefore, the pass-through of interest costs to prices is far from complete. The evidence of that is businesses also saying exactly the opposite: the high rates are pushing their profits down, pushing free cash flows down. If they had no problems passing everything on to prices and thus fuelling inflation, we would hear no complaints that cash flows and profits are in decline. In fact, these two effects are almost impossible to separate. Certainly, we analyse the cost channel in the calculations in our models and forecasts, but we also analyse the aggregate influence of interest costs on price movements.
Further on this subject, the demand channel is much stronger than the cost channel, and that is why the overall effect of higher rates on inflation is lagged.
We are aware that the issue is always under discussion, and we have conducted research into the role of interest costs for companies, looking at corporate statements, but it was based on data up to 2023. Clearly, 2024 is a year of higher interest rates. We will receive the data and update the estimate. I think we will do that by the summer.
QUESTION from Vedomosti:
To continue on the topic of business: are you seeing a slowdown in investment activity and a drop in business margins over concerns that production was about to stop and that there was no way to advance business projects?
Elvira NABIULLINA:
There are data on investments – and they lag behind somewhat – and there are investment plans. The preliminary data show that investment activity in the first quarter is close to the fourth, so there is no evidence of any drop in investment activity.
Clearly, companies are mostly completing the investment programmes they previously launched. We do expect a delay in investment plans.
Nonetheless, investment activity will remain relatively high. Why? It is because the main resource to finance investment is the company’s own capital, as it was in the past, is now, and probably always will be.
Loans account for a much smaller share of the sources of investment financing, and companies’ financial result, or profits, were quite high in the previous years. Even last year, for all the slight decline in profits, they were high by historical standards.
We can say that businesses have their own sources to rely on to finance investment. We are also calling on companies to enter the capital market and raise not only debt financing from banks, but also debt financing from non-bank organisations and equity financing.
QUESTION from Business News Agency (St Petersburg)
The question is this: a number of Russian companies have postponed their IPOs, including due to the high key rate. When do you think are they expected to revisit their plans? When is another IPO boom due?
Elvira NABIULLINA:
True, issuers are interested in selling their shares in a bull market. The stock market is currently growing after the decline throughout the second half of last year. That prevented potential issuers from entering the market. We are well aware that a high key rate also reduces interest in IPOs. However, that period is temporary.
It is important to note that before the increase in the key rate, there was indeed a large number of IPOs – which some call an IPO boom – but major companies rarely went for IPOs.
The development of the capital market is determined by other factors. What matters to the scale of long-term investment, in addition to the key rate, is changes in corporate governance (a company that wants to go for an IPO must be ready for this), the protection of property rights and the rights of responsible investors. All these factors influence the willingness of companies to go public, as well as the willingness of investors to invest in their securities.
We know that the Government is discussing floating the shares of several state-owned companies, and we welcome that. We really need to boost the development of that market, and that is impossible without major issuers entering the market.
QUESTION from Market Power project:
What is the Bank of Russia’s view of the heterogeneity in the business operations of private sector companies and companies which have access to public procurement and preferential financing? Is it unchanged, or is it rising or falling?
Elvira NABIULLINA:
We are seeing more divergence, and business activity varies mainly across sectors. We are going through a structural transformation. A number of industries have gained powerful impetus for development. In the first place, they include industries where import substitution processes are underway following the exit of foreign companies. Growth may also slow in certain industries.
Preferential financing and the large scope of government contracts are certainly advantages for the sectors and companies that receive them. I think that is clear. Two things matter as we see it.
First, public procurement should not cause an overheating, as was the case for preferential mortgage lending in the housing market.
Second, priorities for government support are crucial. Clearly, it would be difficult to carry out this fundamental structural transformation without government support. However, the focus of government support should primarily be the sectors that boost the economy’s potential, that is supply. In supply-side economics, a more rapidly growing economy will bring about a decline in inflationary pressures, all other things being equal.
QUESTION from PRO.FINANSY project:
My question is about family mortgages. There are still instances of unfair bank practices in family mortgages: for example, borrowers confronted with increased property prices or extra fees. The Bank of Russia has on many occasions announced that it seeks to regulate mortgage lending. How can such borrower problems be approached through regulation? When are new measures due?
Elvira NABIULLINA:
It is true that such payments are outside current regulation of the mortgage standard. We must limit the spread of such fee schemes, and we are working with the Standards Committee to introduce further restrictions to the mortgage standard.
We discussed the mortgage standard with market participants for a very long time. A more rapid solution is possible, I believe.
As of today, fees are allowed in the rules for preferential mortgage lending. A rule we will be discussing with the Ministry of Finance will apply preferential mortgages only to standard loans, including loans free of such fees. This will give us a more rapid solution.
QUESTION from Expert:
The US seems to be close to legislating a state cryptocurrency reserve. Similar initiatives have previously been announced in other countries, such as Brazil, Japan and Poland. What is the Bank of Russia's stance on this trend? Will Russia ever need a cryptocurrency reserve?
Elvira NABIULLINA:
I believe that the issue of reserves is somewhat different in a country that issues the reserve currency than in other countries. Attributes of the reserve currency such as liquidity and minimum exposure to credit and market risks are of critical importance for us. The currency must be easily available in large volumes in times of crisis without a drop in value.
Therefore, I do not currently see any circumstances in which cryptocurrency is part of our reserves.
QUESTION from Frank Media:
In today’s release, the Bank of Russia has signalled that it will consider the possibility of raising the key rate if the pace of disinflation is insufficient. What does that mean? Is there a change in the signal, or is the signal, as before, moderately tough? What other options for the signal were on the table?
Elvira NABIULLINA:
We considered two signal options: neutral and moderately tough. It is true that we changed the wording to more accurately reflect our vision: we will consider increasing the key rate in the event that disinflation makes insufficient progress and disinflation trends are insufficiently sustainable.
Previously, our signal said that we would explore the need in subsequent meetings. This time, we have introduced the condition.
QUESTION from Izvestia:
Is the Bank of Russia considering a targeted tightening of monetary conditions through macroprudential policies at the beginning of the key rate reduction cycle? In other words, are you considering an early cut in the key rate in conjunction with a tightening in macroprudential policy or higher risk-weight add-ons?
And another question, please. There has been much talk about the impact of geopolitics on the ruble exchange rate. How exactly do you take into account the geopolitical factor and the news agenda in your scenarios? Do you take it into consideration at all, or is the Central Bank's policy perhaps fully independent of projections for de-escalation and dependent solely on the facts and results of de-escalation?
Elvira NABIULLINA:
We never consider potential macroprudential measures at key rate meetings. We strictly differentiate the two instruments. All the macroprudential measures, add-ons and limits, are aimed at containing the accumulation of the risks of financial institutions and borrowers.
True, these measures may influence and do influence lending growth, and we take them into account in monetary policy decisions as a fact, in the same way that we consider changes in inflation expectations and current inflation movements. However, there is absolutely no need to deliberately modify the macroprudential policies to partially offset necessary key rate decisions. We believe that these tools must not be mixed. Their intended purposes are different. Macroprudential measures are not monetary policy measures.
As for geopolitics, we certainly take all external factors into account, including geopolitics and global economic developments. The global economy is undergoing dramatic changes driven by the rise of protectionism, which is already more than an intention but a fait accompli, and we have to factor its impact in.
As before, changes in geopolitics are considered as a factor with influence on our decisions, if such changes are a reality, if they are sustained, and if we realise that they have a sustainable impact on our decisions.
What else makes this very important for us? We should bring inflation down to our target in any scenario, including if the geopolitical status quo remains in place. A monetary policy aimed at that will definitely achieve low inflation in a more favourable scenario, and we take that into account. Nonetheless, we must achieve our target in a less favourable scenario, and therefore we make our decisions using this scenario’s assumptions until another baseline scenario emerges. The baseline scenario, as I have said, assumes the current level of sanctions.
QUESTION from Furydrops project:
While you have noted that household and business inflation expectations have declined, you have also mentioned that analysts have slightly raised their inflation expectations for 2026. Is this revision due to their reliance on the Bank of Russia's forecast, which was unveiled in February?
And a question about methodology. How appropriate does the Bank of Russia consider a switch to a price index with dynamic weights, rather than the current arrangement of static weights throughout the year? This would follow the example of the Federal Reserve.
Elvira NABIULLINA:
First, there can be a divergence between inflation expectations of households, businesses and analysts. We have seen such a divergence in fact. Indeed, the inflation expectations of both households and businesses have declined, while analysts’ picked up slightly, by 0.2pp if I remember right, for 2026. Still, they remain considerably lower than the expectations of households.
The question is whether analysts’ inflation expectations factor in changes in our forecasts. I think they do, and they also have expectations about our actions related to the key rate path. But many of them rely on their own models and assumptions.
That is why a poll of macro analysts is important to us, and we always hold such a poll in the lead-up to key rate meetings to analyse professional views. They are also taken into account.
ALEXEY ZABOTKIN:
As part of the Monetary Policy Review completed in 2023, we conducted thorough research into an index that could become the basis for the inflation target. It is discussed in a dedicated article, and its findings are still relevant.
As a reminder, there is indeed the unique case of the Federal Reserve using the implicit price deflator. All other inflation targeting central banks rely on the consumer price index. That is because the consumer price index is published earlier, and it is easier to calculate than the implicit price deflator. The former is not revised retrospectively, unlike the latter. The vast majority of countries calculate the deflator on a quarterly, rather than monthly, basis together with all GDP data. The US is a rare exception here, and the standard practice is to use the CPI. One important caveat on this argument is the occasional claim that inflation would be somewhat lower if it were measured with another index.
Indeed, the implicit price deflator is systematically a bit lower than the consumer price index because of its methodology. In this case, given the low US inflation, the average difference is about half a percentage point in annual terms over an extended period of time. However, it only means that the Federal Reserve’s target is actually 2.5% [growth in] the consumer price index. That is, if the index is changed, the target rate for inflation will have to be adjusted accordingly, so that the inflation rate emerging in the economy, if the target is reached, is the same regardless of the index used. It is similar to a car’s speedometer: the unit of measure may be one kilometre per hour or one mile per hour. Depending on that, there will be different road signs indicating the speed limits on each section of road.
Elvira NABIULLINA:
Thank you for your attention.