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Bank of Russia warns of stagflation risk

All central banks are afraid of the risk of stagflation, it is very important for the Russian economy to avoid this scenario. This was stated by the head of the regulator Elvira Nabiullina.

Governor of the Central Bank of the Russian Federation Elvira Nabiullina. Vladimir Fedorenko / RIA Novosti

“As for the risk of stagflation, all central banks are probably afraid of it. And not just central banks, but also the government. This is when inflation rises, and economic growth has stopped in a situation of overheating and labor shortages. It is very important for us to avoid this scenario. Therefore we make decisions to raise the key rate. In order to avoid any prerequisites to go to this scenario,” the head of the Central Bank said.

To form full-fledged stagflation (like stagflation of the 1970s), Russia lacks one important component – high unemployment, economist, associate professor of RANEPA Sergei Khestanov emphasizes.

“Therefore, even if the Russian economy shows negative growth rates, this will be a kind of new phenomenon, but not stagflation in its classical sense,” the expert notes. “It is noteworthy that the stagflation of the 1970s in developed countries was accompanied by severe violations of social stability (just to mention “German autumn” alone).”

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