MOSCOW, July 26. /TASS/. The increase of the Russian Central Bank’s key rate to 18% will prevent the possibility of stagflation in the economy, the regulator’s Governor Elvira Nabiullina told a press conference following the meeting of its board of directors.
"Today’s additional tightening of our policy will allow preventing such a scenario (stagflation scenario - TASS)," she said.
Labor force deficit is becoming one of key restrictions for boosting production in Russia, Nabiullina noted, adding that companies are making major investment in increasing labor productivity, robotization and automation. "However, first, the effect from investment will only appear with time. Second, companies’ costs on purchase of equipment are growing due to overall high inflation and additionally due to sanctions-related obstacles. This reduces business’ possibilities on improvement of labor productivity and modernization," she explained.
"Low inflation, which our policy is focused on, will enable companies to implement their investment programs more efficiently due to more available financing and more moderate costs," the Central Bank’s chief said.
Earlier on Friday the board of directors of the Bank of Russia decided to increase the key rate for the first time since December 2023 - by 200 basis points to 18% per annum, saying that inflation has accelerated and is developing significantly above the regulator’s April forecast. The Bank of Russia noted that it would consider the necessity of further key rate increase at its upcoming meetings.