13 Jul 2022 09:25

Central banker sees no sense in talking about risk of deflationary spiral in Russia

MOSCOW. July 13 (Interfax) - A deflationary spiral can emerge in the absence of monetary and budget policy instruments to support demand, but it makes no sense to talk about this right now, the first deputy governor of Russia's Central Bank, Ksenia Yudayeva said.

"When does a deflationary spiral arise? When demand really falls and there are no macroeconomic instruments to support it, neither monetary policy nor budget policy can do this. Monetary policy, for example, because interest rates are already at zero, and budget policy because, for example, there are big debts and there is no possibility of increasing and spending has to be reduced," Yudayeva said on the New Economic School's Ekonomika na Slukh podcast.

"We don't have this," she said. "We are now seeing some correction of prices after a jump. It seems to me, I would look at it this way, and there is no sense in talking about any spiral right now," Yudayeva said.

The Central Bank and Economic Development Ministry currently disagree in their assessment of deflation risks when looking at the current situation with prices. Economic Development Minister Maxim Reshetnikov believes that Russia is already seeing signs of a nascent deflationary spiral, while Central Bank chief Elvira Nabiullina said that the drop in prices in recent weeks is just a correction after a surge in February-March, not a deflationary spiral.