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Elvira Nabiullina, the head of the Bank of Russia, is defending her policy of high interest rates; she did so against a hostile audience in parliament. Nabiullina has long taken seriously her responsibility for the Russian currency and the fight against inflation.
The head of Russia’s Central Bank, Elvira Nabiullina, continues to face down her critics. Last week, the Central Bank fought back against business leaders who wanted to curb the regulator’s independence. This week, Nabiullina defended record high interest rates before a hostile audience in the Russian parliament.
Nabiullina told deputies Tuesday that the current situation (with interest rates hiked to 21 percent last month) is different from previous crises when the Central Bank raised rates sharply but was then able to lower them again quickly. On those occasions, rates went up in response to external shocks and to “prevent inflation from escalating, cope with a run on the banks, and maintain financial stability.” As soon as those aims were achieved, the Central Bank was able to cut interest rates in order to promote economic growth, reported Russian independent news outlet The Bell.
But now, according to Nabiulina, things are different. The economy is stretched, and a labor shortage means productivity can’t be boosted. Without a strict monetary policy, she said, the economy would be vulnerable to stagflation (low growth and high inflation).
At the same time, the Central Bank is trying to limit the debt burden on large businesses. On Thursday, it published a draft regulation introducing surcharges on new loans, and bonds, for large corporate borrowers, which already have significant debt burdens.
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