Bank of Russia Governor: Key rate should have been raised earlier

Central Bank Governor Elvira Nabiullina admitted that the regulator should have started raising its benchmark interest rate earlier, preferably last spring, she said in an interview with RBC.

Central Bank Governor Elvira Nabiullina. Alexey Nikolsky / RIA Novosti

“Inflationary pressures began to rise in the second half of this year. And now, indeed, prices are rising too fast, much faster than our inflation target. And yes, looking back, we realize that our monetary policy was too soft and we should have raised the key rate earlier,” the head of the Central Bank said.

After the Bank of Russia Board of Directors decided to raise its key rate on December 15, Nabiullina admitted that the regulator was close to the end of the rate hike cycle, but could not yet estimate the period of inflation slowdown potentially needed for a move to ease the monetary policy.

The Bank of Russia hiked its benchmark interest rate five times in 2023, from 7.5% to as high as 16%. The regulator began tightening its monetary policy in July, but announced an unscheduled rate hike by another 3 percentage points in August.

“An excessively loose monetary policy is a far greater danger than an overly tight one, as inflation accelerates quickly but only slows down reluctantly,” economist Sergei Khestanov, Associate Professor at RANEPA, commented.

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