29 Nov 2021 17:15

Central Bank needs to maintain strict monetary policy in order to return inflation to target - Nabiullina

MOSCOW. Nov 29 (Interfax) - The situation with inflation in Russia concerns the Central Bank of Russia (CBR), and the regulator needs to maintain strict monetary policy in order to return to the target indicator, Central Bank Governor Elvira Nabiullina said during a meeting with members of the Association of European Businesses (AEB).

"One of the acute problems that we are facing, and which characterizes the recovery period, is growth in inflation. Inflation concerns us greatly today. It has doubled our target of 4% per annum. We have hiked the key rate, and we are thus far expecting that we will have to maintain strict monetary policy in order to return to the inflation target," Nabiullina said.

Nabiullina noted that inflation is accelerating globally, and that central banks are reacting differently, with some regulators considering it correct to maintain a soft policy, as they believe that the rise in inflation is because of temporary factors. They believe that the factors will weaken in the near future, and that inflation should decelerate without intervening in monetary policy.

However, the CBR adheres to a different position, believing that the situation calls for a monetary policy response.

"Since inflationary expectations have grown, they have grown significantly with us. We believe that this requires a monetary policy response. We do not have the same possibility here just to wait out this period as in countries where inflationary expectations are considered anchored," Nabiullina said.

Nabiullina drew attention to the risk of unwinding an inflationary spiral, when inflationary expectations lead to higher inflation, which leads to higher expectations.

"If accelerated indexation of wages is also included in this spiral, then this is what monetary policy should, in fact, reverse," Nabiullina said.