Translated material
We decided without her
Vladimir Putin talks about reducing the key rate while Nabiullina is on sick leave
Vladimir Putin allowed the key rate of the Central Bank of Russia to be reduced. According to the Russian President, the economic situation “is under control.” Putin, at a meeting with members of the government, said that inflation in the country is decreasing and is already 5.5%.
The head of the Central Bank, Elvira Nabiullina, was not present at this meeting: she is on sick leave. Nabiullina opposes a sharp rate cut. The last time the Central Bank lowered the key rate to 14.5%. In April, the head of the Central Bank admitted that on June 19, when a decision was to be made, the Bank of Russia could leave the rate at the same level.
The fears of the head of the Central Bank are understandable: a sharp reduction in the rate could accelerate inflation even more. But Putin needs to continue the war, which means the economy must adapt to it, despite all the risks.
“ We Can Explain ” found out that Elvira Nabiullina may resign and is generally going to leave the country in the future. Perhaps this is precisely what is connected with her “pause” in work.
Other problems in the economy are also not obvious to the Russian President: there is no “investment pause.” Back in April, Rosstat reported that the Russian economy began the year with the strongest collapse in investment in 16 years.
We talk about what to expect if supporters of lowering the key rate are still able to push through their idea, as well as about other sore spots in the Russian economy that are not visible to Putin, with Radio Liberty economic commentator Maxim Blunt .
The fact that the Bank of Russia remains aloof from economic decision-making
“Symptoms of Elvira Nabiullina’s obvious reluctance to participate in this whole situation have been visible since February 2022, which indicates an additional background: for the first time in many, many years, the head of the Bank of Russia was not invited to a meeting on economic issues with Vladimir Putin. Not only the head of the Bank of Russia, but not a single representative of the Central Bank,” says economic analyst Maxim Blunt. In his opinion, it wasn’t about a performance, there was simply no one to raise objections at the meeting: “They weren’t invited, so there was no one to object to. At the end of last year, he [Putin] called everyone together and instructed them to report by June on bringing the Russian economy to the world average growth rate. Instead, we got a drop in the first quarter, a contraction of the Russian economy... and in such a situation, no excuses work. And then there’s the investment collapse."
Vladimir Putin talks about reducing the key rate while Nabiullina is on sick leave
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On the parallels between what is happening in Russia and Turkey
“He [Deputy Governor of the Central Bank of the Russian Federation Alexey Zabotkin], of course, did not remember Turkey, where, also under pressure from the president, the head of the Central Bank had to be replaced, and the new appointee began to do what Recep Erdogan wanted. Today in Turkey the key rate is 37% per annum - despite the fact that Turkey is not at war with anyone.”
On additional reasons for the Russian budget deficit
“This is a wonderful scheme: you take something away from someone once, then you try to sell it, and they say to you: “No, no, no.” And you: “This is the last time, we will even pass a law now, this will be guaranteed to you forever.” They need to sell [nationalized goods], but no one buys... A hole in the budget that needs to be covered,” explains Maxim Blunt.
On the failures of military production
“This is such a mechanism for destroying resources. Imagine: you are poking around, you have assembled some kind of icebreaker, you are very happy, it was very expensive, the workers have been paid for a year. It leaves the stocks and sinks. Bulk. That’s about the same thing happening with military production,” says economic analyst Maxim Blunt.
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