Nabiullina names main mistakes of the Central Bank

Chairman of the Central Bank of Russia Elvira Nabiullina acknowledged mistakes made by the regulator in 2023-2024. She made these remarks at a congress of financiers in Kazakhstan, as reported by Reuters. One of these errors was the belated increase in the key rate in 2023. The Central Bank’s key rate remained at 7.50% from September 2022 to July 2023 and was only raised to 16% in December 2023. Nabiullina also noted incorrect communication in 2024. Back then, the regulator hinted that the 16% rate was high enough, with a sufficiently strict policy, expecting inflation and subsequently the key rate to decrease. This raised false market expectations, leading businesses to take out loans at floating rates, hoping for a quick decrease. The result was continued double-digit growth in credit activity instead of the anticipated slowdown. By 2025, the rate reached 21% annually. A gradual decrease began in June, with the rate first lowered to 20%, then to 18% and 17%, and in October to 16.5%. In the latest Central Bank meeting, Nabiullina mentioned the consideration of maintaining the rate at 17% or reducing it to 16%. Most stable inflation indicators have remained between 4-6% for several months, without a clear trend towards decrease, as pointed out by the Central Bank head. The regulator is open to either lowering or maintaining the key rate in the upcoming board of directors meeting in December.