Will Russian Central Bank Maintain Independence With Stubborn Inflation? – JP

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Since the beginning of Putin’s rule, the Russian Federation has enjoyed a surprisingly sound fiscal and monetary policy. In recent years, that job has fallen primarily to Elvira Nabiullina, the head of the Bank of Russia.

During the Russian war economy, her hold on monetary policy has been tested.

Russia’s Central Bank will hold its final board meeting of the year on Dece. 20 to discuss interest rates, which are currently at a record 21%. Central Bank head Elvira Nabiullina and her colleagues face a difficult decision. Rising prices and growing inflationary expectations suggest another rate hike should be the logical choice. But the Central Bank has faced harsh – at times vulgar – criticism from bankers and businessmen over the course of the last month. And large swathes of business, Russia’s parliament and some government ministers don’t want to see interest rates go up any more–ideally, they’d like to see cuts, reports Russian independent news outlet The Bell.

Inflation continues to accelerate. On Dec. 9, annual inflation reached 9.32%. Prices went up 1.1% in November and, in annual terms, they are up over 13%, according to Capital Economics. Annual inflation on food prices is currently at 9.9%. The steady growth in food sales, coupled with a plateau in production, suggests food price inflation is due to supply issues, noted analysts at the Central Bank. 

At the same time, businesses are insisting that the Central Bank stops tightening. Sergei Chemezov, head of state defense corporation Rostec, has twice publicly threatened to cease arms exports due to the high cost of borrowing. And a third of Russian freight haulers have said they fear bankruptcy next year due to increased costs and rates. Andrei Repik, head of the Delovaya Rossiya lobby group, last month warned of “guaranteed bankruptcies” among businesses. A quarter of businessmen surveyed by the Russian Union of Industrialists and JPs in November reported deteriorating financial circumstances.