Statement by Bank of Russia Governor Elvira Nabiullina in follow-up to Board of Directors meeting on 12 September 2025
Good afternoon. Today, we have made the decision to cut the key rate to 17% per annum.
Inflation has notably decreased since the beginning of the year, while external demand and economic activity growth has decelerated. Overall, this paves the way for cutting the key rate. Nevertheless, inflation expectations have remained heightened, the growth of corporate lending has sped up, while the uncertainty, including with regard to fiscal policy decisions, persists. In these conditions, we need to make our decisions cautiously, assessing further adjustment of monetary conditions and the response of markets.
I would now dwell on the reasons behind our today’s decision.
Firstly, inflation.
In August, the headline consumer price index traditionally declined, which was largely associated with the seasonal decrease in fruit and vegetable prices. Seasonally adjusted data show that price growth was approximately 4% in annualised terms. However, this does not mean that we have attained the target.
The deceleration in August was to a great extent explained by one-off and volatile factors. For instance, fruit and vegetable prices declined more than normally during this season, which was because of the surge in the first half of the year. Hotel prices dropped more significantly than usual. The most volatile prices for foreign travel and a number of food products were also down.
It is underlying inflation that we focus on, and its measures have stayed in the range of 4–6% over recent months. The current monetary policy stance has ensured a significant decrease in underlying inflation since the beginning of the year. However, we will need time to solidify the disinflationary trend.
This is critical when inflation expectations are elevated. They remain high and almost unchanged among all groups: households, businesses, and financial market participants. The double-digit indexation of utility rates could have negatively affected people’s expectations in August. Another possible factor was prices for petrol, which is one of the core goods impacting households’ expectations about future price growth. Fuel prices soared in the summer months. Given the Government’s measures to limit exports accompanied by the expansion of supply in the domestic market, we expect that the situation here will stabilise.
Secondly, the economy.
GDP dynamics in 2025 Q2 were slightly below our estimates, and output is still generally closer to the lower bound of our forecast for this year. Nevertheless, the sectors focusing on domestic demand have continued to expand, whereas export-oriented industries were rather contracting. This is the result of both lower prices in international commodity markets and the restrictions on Russian producers’ access to some global markets.
The vivid examples are the coal industry, oil production, and ferrous metallurgy. Companies in these industries faced a decline in revenues, while their costs increased. Revenues dropped due to the reduction in external demand and global prices. As for their costs, they increased because of the sanctions and considerable growth in prices for materials, components, and labour, caused by the overheating of domestic demand over the previous two years. According to our assessment, the deterioration of external conditions was the main reason for the decline in financial results of many mining and quarrying enterprises. Higher interest expenses were an additional negative factor for highly leveraged companies, but its impact was much weaker than the adverse effects of external market conditions.
Domestic demand generally continues to expand moderately. We expect that companies’ investment will grow this year, although less significantly compared to the record highs of 2023–2024. Investment demand remains uneven across industries and regions. The monitoring of businesses shows that the manufacturing industry is the leader in terms of the growth rate of investment. Contrastingly, investment in the mining and quarrying sector and construction has somewhat declined. This topic is covered in detail in the new issue of the Regional Economy report.
Consumer demand growth accelerated in July–August. The sectors that were witnessing a decrease in sales over previous periods now see the first signs of a rebound. For example, the demand for passenger cars and housing is rising. The fast increase in households’ incomes supports consumer demand.
Unemployment stays at a record low. Nevertheless, a number of companies have shortened the working week. Today, these approaches are only applied by a few enterprises. We can understand the companies that prefer to retain employees after a long period of the labour deficit, being wary of recruitment difficulties in the future. It is important that these measures should neither hamper workforce movement to enterprises that need to meet high demand for their products nor hinder the reallocation of manpower across regions and industries. Such reallocation will provide impetus to the expansion of output in general.
Thirdly, monetary conditions.
Interest rates in the economy have notably declined in recent months, adjusting to the earlier decisions on the key rate and market participants’ expectations about its reduction in the future. Deposit rates have dropped more notably than loan rates. This is typical of the phase of monetary policy easing. Different interest rates adjust at a different pace, but we will ultimately see that the downward movements will be comparable.
The reduction in interest rates has accelerated lending, especially in the corporate segment. Taking into account the statistics for July and high-frequency data for August, the increase in the loan portfolio is close to the upper bound of our forecast. If lending continues to grow at the same pace, the growth rate of claims on the economy this year will exceed our forecast.
Retail lending edged up in August as well, in both mortgage and unsecured lending. After a decline at the beginning of the year, the demand for car loans has been up over the past few month.
Saving activity remains high, although deposit rates have dropped. Higher incomes encourage both high savings and consumption growth.
We will continue to closely monitor the situation. Given the significant acceleration in lending, we will need to assess more thoroughly the extent to which monetary conditions contribute to further disinflation.
Briefly about external conditions.
Export and import dynamics are close to last year’s figures. However, the deteriorating external conditions might continue to exert pressure on export prices. The growth of imports has been more moderate amid tight monetary policy.
The ruble has depreciated since the previous meeting. The weakening of the national currency is yet another evidence that monetary conditions have eased.
I will now speak of risks.
Proinflationary risks continue to prevail.
They include inflation expectations that are still elevated, despite disinflation observed since the beginning of the year. The labour market still poses a significant risk as its tightness might persist for a long time or even increase further. There are also risks associated with an excessive rise in lending.
An important factor is demand from the government sector. Our baseline scenario assumes that government expenditures will have a disinflationary effect this year. However, this effect has not appeared so far. If the budget deficit exceeds the level predicted in our baseline scenario, we will have limited room for cutting the key rate.
As for disinflationary risks, it is a more considerable weakening of domestic demand.
Winding up, I would like to comment on our future decisions.
As usual, when discussing our future decisions, we will take into account information about the economic situation, lending, and certainly, inflation and inflation expectations. At our meeting in October, a lot will depend on the parameters of fiscal policy that will be ultimately proposed. Our policy is aimed at reaching the inflation target of 4% next year. This is essential for returning to moderate interest rates and ensuring sustainable economic growth.
Thank you for your attention.
Q&A FOR THE MEDIA
QUESTION from TASS:
My question is traditional. What were the options the Board of Directors considered today and did you discuss keeping the key rate unchanged?
ELVIRA NABIULLINA:
The Board of Directors considered two alternatives: reducing the key rate by one percentage point and keeping it unchanged.
The arguments for maintaining the key rate were that monetary conditions had eased considerably and that we would need to assess the consequences of the earlier decisions and receive more information about the future stance of fiscal policy.
QUESTION from Interfax:
How strongly did fiscal policy influence your today’s decision? Do you see any risks that this factor might still not produce a disinflationary effect this year as the end of 2025 is close and the deficit might exceed the target level of 1.7% of GDP?
Did you take into account the ruble exchange rate when making your decision today? Is it possible to say that the trend has reversed, that is, the ruble has started to depreciate?
ELVIRA NABIULLINA:
Our decision reflects the assumptions regarding the budget balance as of the end of 2025 and its parameters for 2026, 2027, and 2028, which are based on the information available to us today.
We assume that the budget will have a disinflationary effect this year, but the extent of this influence will be clear after the Government approves adjustments to the 2025 budget. The Minister of Finance has already stated that borrowings this year might somewhat exceed the target currently stipulated in the law on the budget. We expect the Government to announce the exact quantitative parameters by the end of September and will take them into account when updating our forecast at the October meeting.
Of course, the budget and the predictability of fiscal policy in general are always a significant factor we consider when making our decisions and we have been saying this many times.
As for the exchange rate, we do factor in its dynamics. This is an important indicator of monetary policy tightness and the main indicator through which changes in external conditions affect inflation.
When the monetary policy pursued is aimed at achieving low inflation, a steady, self-sustaining decline in the exchange rate is impossible. Indeed, it is fluctuating, but these movements are inevitable when the economic environment changes. We certainly analyse all these factors when making our decision.
QUESTION from Altapress, Barnaul:
Agriculture is the key industry for Altai. Currently, agricultural producers and processors are facing a rise in expenses on logistics, fuels and lubricants, and spare parts, as well as a decrease in the cattle population. With a high key rate, it is almost impossible to raise a loan secured by a future harvest or aimed at upgrading production facilities. Thus, it appears that the Central Bank is combating inflation, largely fuelled by these very structural problems in agriculture, using an instrument that is exacerbating these problems. Where is the way out of that trap? Does the Bank of Russia consider it necessary to implement targeted refinancing programmes for seasonal and cyclical industries? What can you say about the measures that are currently taken to support agricultural enterprises?
ELVIRA NABIULLINA:
There is no trap as a matter of fact. The rise in costs, which is negatively affecting the agricultural industry, is exactly inflation that we are seeking to tame. Recent data show that the key rate increase is effective and inflation is decelerating.
Why is this happening? After all, the logic goes that companies’ interest expenses on existing loans go up due to higher interest rates, which should push up prices. However, interest expenses normally account for just a small percentage of input costs and, therefore, their growth actually makes little difference. Contrastingly, the costs of components, the breeding stock, seeds, fuels and lubricants, logistics, and labour make up the bulk of expenses, including in agriculture. High interest rates slow down the growth of prices for these resources because a surge in their prices means inflation for businesses. By slowing inflation, we help the real economy address the problem of a persistent rise in costs.
As for the affordability of loans, it is clear that solving this problem fundamentally is only possible in the conditions of low, steadily low inflation. All of us are aware that it takes a long time to achieve low inflation and moderate interest rates, especially after an increase in inflation.
You are totally right saying that there are industries that cannot wait. Whether it is sowing or harvesting, agricultural companies need money here and now for all of us to have food everyday. The Government certainly knows this and provides subsidised loans and direct budget subsidies to agricultural companies. By the way, lending to the industry is also expanding: credit to the agricultural sector increased by 2.5% over the first seven months of 2025.
As your question was in writing, I had a chance to refer to the statistics. Your region is also covered by the programme of the Ministry of Agriculture. Moreover, the loan limits for 2025 have doubled compared to the previous year. The amount of this aid is considerable: over the first four months of 2025, 70% of loans issued to agricultural enterprises in the Altai Territory were granted exactly under the subsidised lending programme. Of course, interest rates have somewhat risen, currently ranging from 8.0% to 12.5% on average, but are lower than market rates.
Furthermore, the Altai Territory is implementing a subsidised leasing programme and a programme subsidising the purchase of domestic agricultural machinery. You have also mentioned production upgrades, which is essential if we think of the future. Nevertheless, I should reiterate that the main source of investment is companies’ equity, profits, shareholders’ funds rather than borrowings.
It is worth noting that, despite all the challenges, agriculture is a profit-making industry. Its earnings totalled ₽315 billion over the first six months of 2025 and ₽650 billion over the twelve months from July 2024 through June 2025. I would like to stress that these are the amounts after all interest expenses and debt repayments. According to the statistics, 80% of all agricultural companies in the Altai Territory were profit-making in 2025 H1.
However, long-term loans are certainly another important source for further development. In this respect, I would like to repeat that loans, especially long-term ones, will be affordable only when inflation becomes sustainably low, and we will definitely achieve this.
QUESTION from Rossiyskaya Gazeta:
You have mentioned a rise in lending. Don’t you think that better mortgage lending terms following the key rate reduction might provoke a new surge in housing prices?
ELVIRA NABIULLINA:
No, we do not expect this. First of all, we are reducing the key rate gradually. As you can see, we are moving on cautiously, cutting the key rate as inflation decelerates. Therefore, market-based mortgage lending will be expanding gradually as well. Of course, prices might grow moderately, but their rise will not be as considerable as over the effective period of the large-scale non-targeted subsidised programme when supply in the housing market was lagging behind soaring demand. In addition, we can observe that the supply of housing is increasing as developers continue to commission a lot of buildings.
Nevertheless, I would like to note that sometimes they say that the share of unsold housing is growing. The data available show that this percentage stays stable: unsold homes in completed buildings account for around one-fourth and those in buildings that are close to completion – 70%. Although fluctuating, these figures have remained stable for several years already, and therefore, the market has available housing. We do not expect a faster rise in prices following the key rate reduction.
ALEXEY ZABOTKIN:
The decrease in the key rate and the overall level of interest rates in the economy will be influencing the affordability of both mortgages and financing for developers. Accordingly, they will be building more homes.
QUESTION from InvestFuture project:
Many business representatives have recently been debating what level of the key rate could help the national economy resume an upward path. What is your opinion about that level? Do we need its further increase after the considerable expansion over the past two years? To continue the question, what level of the key rate would make the stock market grow again? To what extent could it help us implement the President’s executive order about the stock market capitalisation?
ELVIRA NABIULLINA:
Speaking of the key rate level that would help the country resume economic growth, I would like to note that the economy continues to expand and will increase further next year, according to our estimates. Although the pace will be slower compared to the previous two years, as the overheating is close to an end, the economy will still be growing.
Moreover, the greater the overheating, the greater the subsequent slowdown of the economy. We have always been talking about this, and I would like to emphasise this.
When will the growth speed up again? In our view, this will happen when the economy increases its potential to catch up with demand, that is, when the overheating ends and demand and supply both start to expand moderately. This will help bring inflation back to the target of close to 4% and stabilise it at this level. Speaking of interest rates, as you have asked about them, they will return to neutral territory. According to our current estimates, the neutral range is 7.5–8.5%.
However, I would like to stress that it is not lower interest rates that can accelerate growth, but the economy’s return to a balanced state when demand no longer surpasses production capacities. When will this happen? Our baseline forecast assumes that this will happen by the beginning of 2027.
If one tries to spur growth while demand still exceeds supply, or output actually, inflation will not just stay high but will even speed up further. It is an illusion that it can be kept at a certain high level. Any attempts to bolster demand that way will be fuelling inflation, which will ultimately adversely affect sustainable growth. Therefore, we are determined to decrease inflation to steadily low levels.
Now, as regards the second part of your question about growth in the stock market. Valuation of shares depends on the level of interest rates. When they are more moderate, while profits and dividends are the same, share prices are higher. However, it should be stressed that this depends on long-term interest rates rather than the key rate. First of all, one may refer to yields on government bonds with maturities of five to ten years.
I should note that long-term rates, yields depend not only and not so much on the level of the key rate, but also on expectations about future inflation. This is why we are always talking about inflation expectations, including those of financial market participants. Hence, low inflation is critical to increase the market value of shares.
However, what is even more important to achieve a steady rise in the stock market capitalisation, to attain the objectives set by the President is a sustained increase in earnings and dividends and high returns on companies’ reinvestment of retained earnings. There is also another crucial factor – shareholders should be confident that, purchasing a share today, they will retain all rights and opportunities to receive dividends in the future.
Combined, these two factors, that is, high returns on capital, earnings, profitability and respect for shareholders’ interests and ownership rights are much more important for a long-term increase in the value of the stock market than the level of interest rates, in my opinion.
QUESTION from Khakassia newspaper, Abakan:
We observe a steady trend in government spending, which has been growing by 20% during the past three years. If this trend continues, will it be possible to decelerate inflation to 4% next year, which is the goal declared by the Central Bank? Will it still be possible or not?
ELVIRA NABIULLINA:
This is a very good question. We are determined to slow down inflation to 4% in any case. However, fiscal policy certainly impacts the level of interest rates needed to achieve this goal. In this respect, it is the budget deficit rather than an increase in spending that matters. When additional spending that the Government needs is covered by higher tax payments, this does not expand demand and, accordingly, has a neutral effect on inflation and interest rates.
Contrastingly, when higher spending is not covered by tax payments and the budget deficit increases, the contribution of the budget to aggregate demand is growing as well. Therefore, to attain the same 4% inflation target, we need to reduce the contribution of credit, that is, interest rates should be higher. Hence, if the budget deficit turns out to be larger, the Bank of Russia will achieve its 4% inflation target but with higher interest rates and smaller amounts of lending to the private sector of the economy. These are actually communicating vessels: the more the economy will receive from the budget, the less it will receive from credit to the private sector, and vice versa.
QUESTION from Reuters:
According to experts, the economy has slipped into technical stagnation – this is the wording they use. Moreover, a chart in the Bank of Russia’s bulletin Talking Trends shows that GDP has been declining from quarter to quarter. How would you characterise the current situation in the economy? I would also like to ask a clarifying question. Did the Ministry of Finance disclose its preliminary estimates of the budget deficit at today’s meeting?
ELVIRA NABIULLINA:
I would start out with the second part. We do participate in the discussion of fiscal policy guidelines with the Government, but the final decisions will certainly be announced by the Government.
Our baseline forecast, which we have stressed many times, relies on the disclosed parameters of fiscal policy. Of course, we always emphasise the role of budget-related risks, as you can see. When making our decisions, we rely on our baseline forecast, while also taking into account multiple risks and the ratio of these risks. Today’s meeting is no exception.
As regards a recession, I would rather begin with some theoretical aspects, although this is a very practical issue. In macroeconomics, a recession is broadly interpreted as a significant downturn in macroeconomic activity, and this should be obvious from more than one indicator or a number of individual industries. Such a downturn should be recorded in a large part of the economy, typically lasts for several quarters, and is evident from a broad range of indicators, including employment, households’ real incomes, consumer demand, output, and sales across a large number of industries.
Indeed, analysts tend to talk of a technical recession when the statistics show a decline in real GDP for two consecutive quarters.
However, I would make three observations in this regard. First of all, it would be a mistake to consider this an actual recession when no other indicators prove this. I have already said that there should be a broad range of indicators.
Secondly, the statistics on GDP, and the more so quarterly data, quarterly breakdowns, can be considerably revised. This is why macroeconomists do not assess the economic situation only by measuring GDP, but should rather analyse the situation comprehensively.
Thirdly, the estimates of seasonally adjusted GDP dynamics significantly vary. Referring to our estimates, indeed, they show that GDP declined in 2025 Q1 after its substantial rise in 2024 Q4. According to our estimates, which we will adjust further (as the detailed breakdown of GDP has not been released yet), and as far as I know a number of analysts have the same view, seasonally adjusted GDP in 2025 Q2 was higher than in the previous quarter.
Hence, the very statement about a technical recession is at least debatable so far. We do observe cooling in the economy, that is, a slowdown of its growth. It is natural when a cycle of overheating is coming to an end, that is, when production capacities are expected to catch up with demand, which we have always been talking about.
This can be compared to running: the faster you have been running, the higher your rate is and, therefore, the longer you need to run more slowly in order to slow your pulse and return to a steady running pace. This is why we are saying that the greater the overheating, the sharper the slowdown that might follow.
Indeed, the situation is uneven across industries. I have just said that industries oriented towards external demand are facing a more considerable reduction, which is associated with both a decline in external demand and prices for Russian exports and the continuing structural shifts in the national economy as it is increasingly refocusing on the domestic market. A decrease in employment and the utilisation rate of production capacities in the sectors oriented towards external demand as such is not a sign of a recession in the conditions of such structural changes.
Speaking of domestic demand, we can see that it continues to grow, albeit more slowly compared to the previous two years. According to our assessments, in 2025 Q2, seasonally adjusted domestic demand was higher quarter on quarter.
As regards the first six months of the year in general, seasonally adjusted consumption and investment exceeded the levels of 2024 H2.
What are the indicators we rely on? We analyse a broad range of indicators, including those available in the publication Monitoring of Businesses. We have a wide sample of enterprises and they give their estimates of current and expected demand. By the way, we release the data of this monitoring and are pleased to know that many analysts, experts use it.
In addition, we also use the information about payments made via the Bank of Russia Payment System, analyse other data, POS terminal data, and so on.
What can we say about the past two months, July–August, judging by these high-frequency data? They are heterogeneous, but generally suggest a slight pickup in consumption. Therefore, we currently observe moderate growth, according to our estimates.
I would like to reiterate that our forecast assumes that the economy will expand over the year as a whole. Today, the economy is slowing down in line with our expectations, but still closer to the lower bound of the forecast.
QUESTION from Dengi Ne Spyat project:
On the one hand, a stronger ruble supports, or so to say, stabilises inflation expectations, while on the other hand, a stronger ruble combined with a negative environment is putting upward pressure on the budget deficit and the amount of liquid assets used from the National Wealth Fund (NWF). What is the Central Bank’s view regarding the problem of the budget deficit and spending of the NWF’s liquid part?
ELVIRA NABIULLINA:
First, I should probably give some explanations about the fiscal rule mechanism. The budget uses the NWF’s resources to cover a shortfall in oil and gas revenues resulting from a decline in the oil price below the cut-off level. The reduction in oil and gas revenues due to the ruble appreciation is not covered from the NWF, but increases the budget deficit. Therefore, the exchange rate has no effect on spending from the NWF. The Government can cover this deficit by either raising additional borrowings or using available balances of budgetary funds.
However, a larger budget deficit certainly implies a bigger contribution of the government sector to demand. Of course, we take this into account when assessing aggregate demand and the overall impact of the exchange rate on the economy and inflation. Nevertheless, even given these effects, all else being equal, a stronger ruble certainly comes with lower inflation. The NWF’s liquid part should be maintained at a level supporting the robustness of the budget, which we have always been talking about. In other words, it should cover any possible shortfall in oil and gas revenues if low crude prices persist. With the cut-off price set at a lower level, the NWF’s safety buffer will certainly be larger.
QUESTION from BankInformService news agency, Yekaterinburg:
Corporate lending is quickly rebounding. In July, the growth rate of the portfolio was 1.1% month on month, which is already close to the 2024 level. Can’t this provoke a new wage-price spiral?
ELVIRA NABIULLINA:
You are right saying that corporate lending was quickly expanding, at least over the past two months. In early 2025, its growth decelerated due to both tight monetary policy and larger advance payments for government orders from the budget. This reduced companies’ need for working capital financing.
We can see that corporate lending notably recovered in July–August, which is also a consequence of monetary easing. Currently, this is in line with our forecast for 2025.
Indeed, the growth rate of lending over the year in general should stabilise at a much more moderate, balanced level than in 2023–2024 when the surge in corporate lending was one of the reasons behind soaring demand, acute staff shortages, the lack of opportunities for companies to ramp up output quickly and adequately, and ultimately, higher inflation.
We are pursuing tight monetary policy aimed at decreasing inflation. Therefore, answering your question about a wage-price spiral, this will mean that the labour market will become more balanced, that is, wage and labour productivity growth rates will start to converge.
QUESTION from RIA Novosti:
Earlier, on the sidelines of the World Economic Forum, the President admitted that Russia and China can set up a joint payment network. What is the Bank of Russia’s assessment, given its monetary policy stance, of how the development of international settlements is affecting the stability of the Russian financial market? How will this cooperation be organised in general?
ELVIRA NABIULLINA:
Usually, we do not comment on cooperation in international settlements. Overall, I can say that, despite the external restrictions, Russian banks and companies are developing a range of alternative payment methods. Therefore, this has no effect on stability or monetary policy today.
QUESTION from Market Power project:
Will the ruble strengthening continue to translate into consumer prices in the next few months, as it was in the first six months of the year, or has the disinflationary effect of this channel been largely exhausted already, in the Bank of Russia’s opinion?
ELVIRA NABIULLINA:
We believe that the disinflationary effect of the earlier ruble strengthening has already been exhausted.
ALEXEY ZABOTKIN:
This does not imply that inflation will start to accelerate as a result. This means that disinflation will be increasingly driven by other transmission channels, in particular the main one, which is the credit channel.
Returning to the previous question, for the credit channel to work effectively, the growth rate of lending to the economy should certainly be much more moderate than in 2023–2024.
QUESTION from Law and Finance project:
The Ministry of Construction reports that up to 30% of developers might be at risk. Is the banking system ready to a stress scenario in housing construction and do you have any assessments of the share of troubled projects in major banks’ portfolios?
ELVIRA NABIULLINA:
We have not seen the calculations you are talking about and, therefore, I do not know what this 30% share means and whether this is about the percentage of the portfolio of projects or the percentage of companies.
Our calculations differ. According to banks’ estimates, potentially troubled projects currently account for about 5% of the portfolio and this share has not changed compared to the beginning of the year.
In this regard, it is important to look at the indicators characterising the developments in the industry. As for housing sales in square metres, there is almost no reduction as compared to periods when there was no overheating in the market, that is, before large-scale subsidised mortgage lending. There is an increase in mortgage lending. Most developers remain profit-making. Sales in money terms indeed dropped, but moderately, in our opinion.
The coverage of loans issued to developers with the funds in escrow accounts decreased, but not much either. This makes it possible, among other things, to keep the average interest rate for developers at a moderate level, which is currently 10.5%, and developers’ projects thus remain profit-making.
We can see that construction companies also respond to the situation adequately, reducing the number of new projects so as to complete the earlier launched projects.
Of course, this is about the situation in the market as a whole. There might be some projects with low sales. There might be certain companies which, as I have already said many times, are highly leveraged, and this is a problem for them. A number of companies might postpone the commissioning.
What can we see? We see that, in such cases, banks approve loan restructuring applications from these developers if banks believe that they will be able to sell the apartments within a reasonable period. Banks want these projects to be completed, the apartments to be sold, and the loans to be repaid.
Speaking of the quality of the banking book as a whole, bad loans, which are loans of quality categories IV and V, currently account for approximately 1%, and that is a very small percentage. We do not observe any rise in the restructuring of bad debts – this share is about 2% now.
QUESTION from Expert:
In its Regional Economy report, the Bank of Russia notes that companies’ price expectations have been decreasing throughout the year as a result of the ruble strengthening. However, due to higher expenses, which have been growing fast, price expectations have remained above the levels of 2017–2019 when inflation was close to the target. Costs are pushed up by higher prices for raw materials and components, as well as rising wages, according to the report. Doesn’t the Central Bank have any concerns that, as the key rate remains high, while various economists often say that there is no sense in discussing a level above 12%, non-monetary factors will not stop fuelling inflation and that this is, so to say, a vicious circle?
ELVIRA NABIULLINA:
No, we do not have such concerns. To the contrary, a high key rate cools demand and, accordingly, decelerates inflation. However, what you have referred to as non-monetary factors are actually the demand-side factors that we are able to influence through the key rate.
As a matter of fact, the increase in companies’ costs today is to a great extent inflation that households are suffering from. Higher retail prices imply consumer inflation, while rising prices for components and equipment mean inflation for enterprises.
The fundamental reason for the growth in companies’ costs is the same, that is, businesses are unable to expand production capacities quickly enough to meet soaring demand. To ramp up their output, enterprises begin to compete for the resources they need, including raw materials, components, and equipment. As we know, the less resources are available in the market, the faster their prices increase. Therefore, it might well be referred to as demand-pull inflation rather than cost-push inflation, although it is often called that way, but it is actually fuelled by demand-side factors.
In order to cool demand, we raised interest rates last year and have achieved the desired effect: the demand and supply gap is decreasing, which is evident as current price growth is decelerating. Hence, we can cautiously reduce the tightness of our monetary policy for it not to be excessively restrictive.
QUESTION from Economikal channel on Telegram:
According to the press release, inflation expectations remain high. The European Central Bank recently published a research paper, the main idea of which is that the more efficiently a monetary policy decision is communicated to non-professionals, the more efficiently households’ inflation expectations are anchored. Does the Bank of Russia have similar studies and does it have any special opinion about this? Do you plan any additional improvements to better communicate monetary policy decisions in a simpler form to non-professionals?
ELVIRA NABIULLINA:
This is also a very important issue. We make our best efforts to be open and transparent and to explain the rationale behind our decisions because we firmly believe that the better people understand the reasons for our decisions, the better they comprehend the policy we pursue in order to bring down inflation. Therefore, inflation expectations may be anchored more effectively, which is proven by the experience of other countries. This means that, even despite a sudden spike in prices, households do not need to stock up on products because they are aware that the Central Bank will be decelerating inflation.
However, communication cannot replace facts. People certainly form their inflation expectations based on the retail prices they see. If inflation stays high for a long time, we will need a prolonged period of sustainably low inflation to anchor inflation expectations. This is the experience of many countries.
Inflation in Russia was low in 2016–2019, which is not a very long period by historical standards. Therefore, over the subsequent periods of higher inflation, we could see that inflation expectations were not anchored effectively enough, to say the very least, which was one of the reasons for the inertia of high inflation. We take this factor into account and, accordingly, are monitoring inflation expectations.
ALEXEY ZABOTKIN:
I would like to say a few words about research. We have a lot of papers about communication in our Working Paper Series, as you know. However, we will be able to prove, relying on actual data, that inflation expectations are anchored more effectively when households are better informed only after they actually become more anchored because currently we simply lack data points that would confirm this.
ELVIRA NABIULLINA:
Unfortunately.
QUESTION from Bloomberg:
What is your opinion about a potential increase in taxes next year, namely VAT? How can this affect the inflation rate and its movement towards the target?
ELVIRA NABIULLINA:
It is not a rise in particular taxes that matters to us when we make our decisions, but rather an overall balance of the budget. As I have already said, if the Government increases budget expenditures, it would be better if they are covered by revenues rather than through an increase in the deficit because if the budget deficit expands to finance all necessary expenditures, our key rate will be higher.
QUESTION from Russia 24:
Mass media reported that Russian citizens had been increasing their foreign currency savings, preferring cash holdings. Is that true? If so, does this mean that they expect the ruble to weaken in the near future?
ELVIRA NABIULLINA:
We cannot confirm that Russian citizens have been increasing their foreign currency savings. Probably, this is just about misinterpretation of data. If we measure foreign currency assets in US dollar terms, we need to take into account that people save part of these assets not in US dollars, but in another foreign currency, e.g. Chinese yuan, etc. When the US dollar weakens against this currency, we can see a rise in the value of assets in US dollar terms, even though they are denominated in yuan. This is exactly what is happening this year: the US dollar is depreciating in global markets.
We do not observe that people are switching from ruble savings to foreign currency, whether in cash or not. Households’ behaviour is quite rational: they benefit from high interest rates making savings in rubles.
QUESTION from Bitkogan project:
You have repeated twice that a weaker ruble is an indicator of monetary policy easing. What are the reasons for the ruble depreciation today and which is the main one, in the Bank of Russia’s opinion?
ELVIRA NABIULLINA:
What we have said is that the exchange rate dynamics observed recently are explained by monetary easing, among other things, but this is certainly not the only reason. Another important factor is the external environment, but one of the main reasons is monetary policy easing.
ALEXEY ZABOTKIN:
I would like to emphasise that the movements observed over the past three months are recorded in the lower part of the range within which the exchange rate has been fluctuating over the past two years. Therefore, it would actually be not quite right to say that the ruble is persistently weakening. The ruble is fluctuating close to the levels of a relatively strong exchange rate as compared to the records of the past two years.
QUESTION from Rossiyskaya Gazeta, Vladivostok:
The multiple tasks that the Central Bank seeks to solve today include a decrease in aggregate demand. The Bank of Russia claims that when demand cools, inflation will slow down as well. I think that this objective contradicts all economic fundamentals, except perhaps purely speculative schemes involving financial bubbles. We can see a slump in the demand for motor vehicles, agricultural machines, and equipment. Even the demand for apartments has declined. Is this situation normal? I only read about that in Ayn Rand’s Atlas Shrugged and, even there, as a bad example for the economy.
ELVIRA NABIULLINA:
You have given examples, which are actually very good. Let’s consider them, e.g. housing construction. The fiscal stimulus that was in the form of large-scale government subsidised mortgage lending has failed to notably expand supply, having mostly translated into prices. What can we see now? Since early 2020, housing construction has increased by 10%, while prices have doubled. As a result, housing has not become more affordable, even though people’s incomes have risen. This is an example vividly showing possible consequences of attempts to artificially prop up demand while ignoring the capacities to ramp up supply.
You have also said about the sales of motor vehicles, but this is a decline after last year’s surge. Sales then soared in anticipation of the increase in the recycling fee. Thus, the demand of 2025 H1 was partially covered earlier. The period of such abnormally high demand, which was observed last year before the rise in the recycling fee, was actually redistribution of future demand.
However, we can see a rebound in the car market in recent months. This rise is driven by both dealers’ discounts and promotional offers, as they have accumulated large stocks, and a pickup in car lending. Indeed, the demand for cars is still below the peaks of 2024. However, over January–August 2025, the sales of new cars on average exceeded the monthly averages of 2022–2023.
Therefore, I would like to repeat that a balanced growth rate of demand and supply are the key factors for output to grow sustainably and for that stimulus to not simply translate into higher prices.
QUESTION from RBC:
In your statement following the meeting, you noted that a larger budget deficit would limit the opportunities for the Bank of Russia to further ease its monetary policy. However, before that, you said that the regulator was concerned about non-fulfilment of the fiscal rule rather than an increase in the budget deficit. How high are the risks of non-fulfilment of the fiscal rule, in your opinion? Have you assessed this factor?
ELVIRA NABIULLINA:
Let me speak once again about our approaches. The baseline forecast, which underlies our decision, takes into account the parameters announced by the Government. However, when making our decisions, we certainly assess the existing risks to the baseline forecast and the ratio of these risks. This is why we describe these risks in our communication.
Indeed, changes in the budget parameters might be an important risk factor and, when making our decisions, we discuss this issue and take it into account.
ALEXEY ZABOTKIN:
However, this approach applies not only to assumptions regarding the budget, but to all the assumptions of the baseline forecast.
Furthermore, when making our decisions, we certainly factor in the direction of the most likely deviations from the assumptions underlying the forecast.
QUESTION from Moskovsky Komsomolets:
My question is about deposits as there are now multiple studies, and the Bank of Russia has probably conducted its own studies as well, saying that interest rates on bank deposits are quickly declining. Due to a decrease in deposit rates, there are many speculations that people need to look for an alternative to bank deposits. As we know, there are entire sectors hoping that individuals will withdraw their deposits from banks to invest these funds. Construction companies expect people to invest their money in apartments, the stock market – in shares, and so on. Is the Central Bank monitoring how quickly and rationally banks are reducing their deposit rates? Can banks’ decisions cause a rapid outflow of household deposits from accounts if, for example, banks set an interest rate at about 8%, that is, slightly above the inflation rate, let’s say a little higher than 8%? Will the Bank of Russia do anything to ensure that banks lower deposit rates gradually or is this the banking sector’s business?
ELVIRA NABIULLINA:
We are perfectly aware that deposit rates should offset future inflation to be attractive to depositors. Therefore, when making our key rate decisions, we do this so as to ensure that deposit rates protect savings against inflation. To this end, we are closely monitoring the dynamics of interest rates not only on bank deposits, but also on loans, different types of loans, etc.
As you can see, short-term deposit rates usually follow the key rate or expectations about a future change in the key rate.
Interest rates on long-term deposits are currently lower as they are affected not only by expectations of a reduction in interest rates in the near future, but also by expectations of an overall decrease in interest rates to the neutral level in 2027. In view of this, the decline in deposit rates is quite natural. As we can see, people are also totally aware that interest rates currently offset their expectations about inflation. Although inflation expectations remain elevated, interest rates are sufficiently attractive, and we can see this from the dynamics of savings. The saving ratio stays high.
As for banks, they are not interested in cutting deposit rates unreasonably fast either, since they are competing for depositors. This is their business and they seek to retain clients, which is why they decrease their interest rates reasonably, following inflation.
Indeed, we do not intervene in banks’ interest rate policies – this is a market process. Nonetheless, we are monitoring the dynamics and take them into account in our decisions.
ALEXEY ZABOTKIN:
It is essential to comprehend that deposit and loan rates are interconnected. If borrowers raise loans from banks at high interest rates, banks in turn will raise deposits at high interest rates. If loans are not raised at high interest rates, banks will be decreasing their deposit rates.
ELVIRA NABIULLINA:
Loan rates are also changing...
QUESTION from Volga 24, Nizhny Novgorod:
My question is about mortgage lending. As we know, the State Duma recently approved an additional allocation from the Reserve Fund in the amount of more than ₽100 billion to support subsidised mortgage lending programmes in order to prevent a crisis in the construction industry and, of course, prop up declining demand. It seems that, in this respect, the efforts of the State Duma and the Cabinet of Ministers are directly opposed to those of the Central Bank which, to the contrary, is striving to cool demand through its tight monetary policy and somewhat slow down the growth in the lending market. In this connection, my question is as follows. Do you communicate somehow with the State Duma and the Government as regards subsidised mortgage lending programmes? As we know, previously, the Bank of Russia did not support the extension of subsidised mortgage lending programmes.
ELVIRA NABIULLINA:
Let’s make it clear what this amount of ₽100 billion that you have mentioned is intended for. It is not meant to expand the programme, but is additional funds from the budget needed to subsidise the interest on earlier issued subsidised loans, which is needed because interest rates have risen.
This is yet another proof that extensive subsidised programmes may not only provoke an increase in prices exceeding the growth rates of people’s incomes, but also require considerable budget expenditures where the fiscal system accepts all the risks associated with a rise in interest rates, which is exactly what has happened now. Moreover, these are long-term programmes, which implies long-term obligations of the budget.
This certainly characterises the scale of the problem. This is why we have always believed that any subsidised programmes, whether mortgage lending or business programmes, should be targeted and very focused. Otherwise, a situation where the Government launches multiple programmes accepting all the risks of an increase in interest rates involves a large amount of budget spending on subsidies to banks, thus diverting the resources from various social, investment, and other priority initiatives.
We are certainly communicating with the State Duma and the Government on a continuous basis and have stated our view many times, including on subsidised lending. As we can see, today, the Government is also concentrating its subsidised programmes primarily on priority areas, supporting particular groups of people and particular industries that really need this aid at a given moment.
QUESTION from Anna Finance project:
Following the introduction of amendments to Federal Law No.
And question two, please. What is the Bank of Russia’s opinion about purchasing new apartments through instalment schemes? As you know, the lawmakers have signed a law allowing individuals to buy apartments only using short-term instalments: at first, for six months and, later on, four months. People are now concerned whether they will be able to purchase an apartment using instalments as this is an instrument that is frequently used today.
ELVIRA NABIULLINA:
As for the blocking, indeed, this is a matter of concern to us as we could see a spike in individuals’ complaints about unjustified blocking of funds. Of course, it is critical to take measures in this regard so that banks do not block honest people’s money.
The mechanisms of the so-called blocking are applied for several reasons and are different. We advised banks that they should differentiate between them, inform individuals about the reasons for blocking, and implement efficient mechanisms allowing people to challenge these decisions.
I would like to remind you that funds may be blocked for three reasons. First of all, this is an anti-fraud measure if a bank suspects that a transaction is fraudulent and scammers are trying to withdraw the money. The second reason for blocking is suspected money laundering, which is an anti-money laundering measure. The third reason for blocking is a violation of the tax legislation. These are the three reasons why banks are entitled to suspend transactions.
Speaking of anti-fraud measures, a bank is obliged to block a client’s card only when the bank has received data about this client from the Central Bank’s database, while this information is supplied to the database by law enforcement agencies. Nevertheless, an individual can conduct any transaction personally in a bank’s office when bank employees communicate with the client to reduce the risk of fraudulent transactions. In other words, the transaction can be conducted, but the individual will need to visit a bank’s office personally.
If a bank suspects money laundering, it usually disconnects the client from mobile banking and rejects a suspicious transaction.
When an individual breaches the tax legislation, transactions on his/her account are really suspended.
The mechanisms for challenging such decisions differ, and those for unblocking differ as well. The common feature is that an individual should visit a bank’s office personally.
I would like to reiterate that, seeing what problems individuals are facing and how banks are using their rights and opportunities, we have issued an information letter recently recommending that banks should clearly explain the reasons for the blocking and what people should do to unblock the funds. Currently, we are monitoring how banks follow these recommendations. Usually, banks do follow our recommendations and I hope that this problem will be solved.
Overall, we are certainly interested in the efficiency of the current mechanisms in combating fraud and money laundering. I believe that everyone is interested in this because there are many people who have become victims of fraudsters. However, it is crucial to ensure that honest people do not face such problems, which is why we are now improving data exchange with banks.
By the way, we used to have a similar issue with blocking in relation to small and medium-sized businesses several years ago. As you remember, there were a lot of complaints then. A systemic solution was creating the Central Bank’s platform Know Your Customer where we identify suspicious clients based on certain features relying on data not from an individual bank, but from the entire banking system. We can see that not many businesses are in the red zone there and the percentage of errors is minimal.
Currently, we are thinking of developing a similar solution for individuals for honest people not to face such problems. The process of establishing such a platform will take time. Nonetheless, we can see that this system has removed these issues with blocking for small businesses as we have tested the system together with them.
As for your second question, which is also important, we have no objections to instalments. The matter of concern is that all rights of a person purchasing an apartment must be protected. When an individual raises a mortgage loan from a bank, his/her rights are protected by law, and there are many requirements to protect the borrower. First of all, a bank must inform the client about the effective interest rate in a special form for the borrower to know the exact amount he/she will need to pay to the bank. This effective interest rate may not exceed the limit established by law. Furthermore, in certain cases, a bank must grant loan repayment holidays if an individual faces challenges. A buyer is entitled to pay off the mortgage early and thus reduce the amount of interest, and so on.
What is an instalment scheme? It is actually similar to a loan. However, people purchasing a home using instalments have almost no guarantees. As we can see, instalments are only allowed for short periods, e.g. two or three years, that is, such a scheme cannot be extended. Usually, developers very often say that interest rates will drop and a person will then raise a mortgage. However, nobody guarantees that a person will be able to raise a mortgage. It is for a bank to decide whether to issue a mortgage loan to a particular individual or not, while the buyer thinks that he/she will purchase an apartment right now using instalments and will then raise a mortgage. What if a bank refuses to issue a mortgage to that buyer? He/she is not the owner of the apartment and, therefore, he/she might lose both the apartment and the money.
Furthermore, banks are obliged to monitor a borrower’s debt service-to-income ratio to make sure that the person will be able to repay the mortgage. Hence, the information about instalments should certainly be transparent. In our opinion, the data on instalments for housing should be supplied to credit history bureaus. However, this information should be provided by banks rather than developers, in our view. Banks already have an effective channel of communication with bureaus, and this process is controlled by the Bank of Russia. The mechanism of instalments is developing. However, I would like to reiterate that people’s rights must be protected, in our opinion. Otherwise, this will involve huge problems later on.
QUESTION from RBC, Kaliningrad:
What do your think of some experts’ conclusions about long-term neutrality of money in Russia?
ALEXEY ZABOTKIN:
Briefly, we totally support the idea of long-term neutrality of money. This is one of the basic concepts of macroeconomics proven by multiple studies on this topic conducted since the end of the 1960s when this principle was first stated.
Probably, I need to explain what long-term neutrality of money implies. This means that a change in money supply can only affect demand and economic activity over a short-term horizon.
What is a short-term horizon for economists? It is a period of several quarters. Beyond this period, money supply has no effect on real variables, like labour productivity or real GDP. These variables depend on the structural characteristics of the economy, including technological progress and organisation of production. With the amounts of money supply and its growth rates being different, in the long term, this will ultimately affect the level of prices, that is, the inflation rate accumulated over this period, but not GDP growth rates.
To put it simply, this actually implies that the amount of money printed cannot ensure long-term growth.
Your question is probably inspired by a recent article by Kartaev and Gerelishina, two economists from the Moscow State University, having the same name ‘Long-term Neutrality of Money: Is It Observed in Russia?’. This article actually demonstrates that this result tested in other economies for decades is also confirmed by Russian data, which allows us to be more confident that it is right to take this result into account when making our decisions.
QUESTION from PRO.FINANSY project:
The Russian bond market is quite large and investors purchase bonds. There is also a primary bond market, which is large as well. However, there are some difficulties, e.g. there is no information in advance about the time when trading will start and it is impossible to know allocations in advance. The liquidity of some bond issues is limited. Considering all this, does the Bank of Russia plan any regulatory changes to make this market more transparent? First of all, it would be easier for investors to make decisions. Furthermore, higher transparency will boost demand in the market.
ELVIRA NABIULLINA:
Indeed, the bond market is an essential segment of the financial market and has been actively developing. To this end, we have been implementing a complex of measures for many years. We consider them effective as the market is really becoming very attractive.
Nevertheless, I would like to note that the primary bond market and the initial public offering (IPO) market differ. They should not be compared. In contrast to the IPO market where shares are sold within a short period, sometimes a day, bonds may be traded even during several weeks in some cases until an issue is sold out.
In this connection, we do not see any serious problems in the primary bond market, to tell the truth. Many issues have limited liquidity. This is true. However, this is due to absolutely natural factors. There are small issues, issuers with low credit ratings, and in this case investors may buy a very small block of bonds or even only several bonds and hold them to maturity, being aware that they have a low rating. As a result, supply and demand in the order book may really be limited to just a few units. The spreads are wide there and this restrains trading. However, in our opinion, these liquidity-related issues do not require any interventions on the part of the regulator.
As for small bond issues, you are right saying that investors often lack information about the first day of trading. Furthermore, if the issuer of a small issue sees no demand on the first day, the start of the trading may be postponed, but we do not consider this to be a problem for investors either. In contrast to shares that investors frequently purchase to then sell them on the next day or within a short time and lock in profits, bonds are more often bought to receive coupon payments, while the first of these coupons is paid in a month. In other words, there is no problem here even when the start of trading is postponed.
Still, to make a decision on investment in bonds, it is critical for investors to explore the issuers before purchasing bonds and monitor the issuers’ position until the maturity date of these bonds. Nobody is insured against default risk. Investors should clearly understand that these are investments and not deposits, while investments always involve risks.
We are monitoring the situation with primary bond offerings. There are probably two areas we are currently analysing in terms of how to improve this market.
The first one is related to convertible bonds, which is a type of bonds that the holder can convert into shares. We can see that there is no demand so far due to excessively strict regulations in this market, in our view. We will consider what we can do here.
Secondly, we believe it necessary to enhance the mechanism of representation, the institute of representation of bond holders. We are thinking of establishing qualification and reputation requirements for them and expand their access to information about issuers for representatives of bond holders to represent investors’ interests more effectively. Investors certainly need such information.
Thank you for your attention.