The Central Bank and Russian business – not tough, but simply cruel
You just need to believe in Russia
Many of our ancestors spoke of Russia's special status, and there are those who speak of it today. In our country, professionals in politics and economics – the brilliant trio of Primakov, Maslyukov and Gerashchenko – managed to turn even default, albeit not a complete one, into an economic benefit.
What is important is the result, which we are still using, and which has also allowed Russia to lay claim to real sovereignty, with which now, it seems, no one in the world knows what to do. It does not work by means of the dollar - few of us even paid attention to its jump over the 100 ruble mark at the exchange rate.
But the helmsmen from the Ministry of Finance and the Central Bank almost went into a stupor because of this a couple of weeks ago. Rumor had it that both of them - Anton Siluanov and Elvira Nabiullina - were afraid of being dismissed, immediately. And they should thank fate that no one from above even asked them about anything in those days. Otherwise they would have had to shoot themselves - at least on a personal computer.
Following the "dollar going over a hundred", the Bank of Russia decided to publish an aggregate indicator of the rigidity of the monetary conditions. It is not made public regularly and very rarely, apparently, now is just the time to somehow justify not only the fact that inflation cannot be suppressed, but also the jump in the dollar exchange rate.
The indicator includes a number of components, including inflation expectations, which are, frankly speaking, difficult to predict, growth rates of credit and monetary aggregates, settlement rates, as well as interest rates and availability of credit, which are directly regulated by central banks not only in Russia.
You know how things are with inflation expectations now – it was worse just before the default. But this, paradoxically, is direct evidence of the softness of real monetary and credit conditions. Relative softness, of course. High rates, on the contrary, indicate the toughness of the Bank of Russia's policy.
Where the bed is hard, there is softness to sleep?
The softness is hidden, first of all, in the rates on deposits, which now few can afford to increase, although the rich, as always, are getting richer, the poor – poorer. At the same time, at the moment we have the most powerful acceleration of the money supply since the crisis of 2008-2009.
Loans are growing, outpacing those same deposits by several times. Inflation is off the charts even in official data. There is no need to explain who is to blame, especially since it is faceless - SVO, that is, together with the illegal Kyiv regime, all unfriendly countries. Then it remains to understand what to do?
We have no answer. Calling for a relaxation of monetary and credit conditions means condemning the economy to stagnation. And it is so heated that it is not entirely clear what we will do in the event of victory or, much worse, peace under someone else's dictation.
And as soon as you think about peace, you think about military spending. We won't compare interest rates with NATO countries now - ours is higher, and much higher. That's why the Bank of Russia's policy is now extremely tough - there is simply no other option.
The notorious monetary and credit impulse has broken all records today, and therefore at least some softness is possible only in relation to those working for defense, or more precisely, for victory. Inflation, as is known, occurs due to excess money supply, that is, loans go into the economy no matter what, and it is unlikely that all of them are taken on the actual declared banking conditions.
Otherwise, everyone who could and those who couldn't would have gone bankrupt long ago, absolutely not. No, we take out short-term loans at 25, 30, or even 80-100 percent per annum. This was also the case in much calmer years, when the key rate in the Bank of Russia was kept below 10 percent. The pace of lending and, accordingly, the growth of the money supply will decrease synchronously and quickly, but the only question is - when?
The answer is as soon as non-state business and the public itself stop expecting high inflation, and when it stops being pushed from above with tariffs, taxes, etc. Let us recall that the expectations, those same inflationary ones, of banks and financial market participants were quite moderate six months ago.
We expected a softening from the Central Bank of the Russian Federation closer to the end of the year, but reality dictates otherwise - before the second half of 2025, we should not expect to reach a balanced trajectory of yield in the region of 12-15% or even lower.
Russia is not Europe and not even Türkiye
This subtitle could be continued like this: it’s good that it’s not Ukraine or Syria, although even there, not without our assistance, things might not turn out so badly. However, we will hardly be able to return Libya, which was simply flourishing not so long ago, to our sphere of influence, Iraq too, although for now everything is calm in Baghdad. Not like in a cemetery, but…
The Bank of Russia has no doubt that "Russian companies have accumulated a reserve of safety". And the tight monetary conditions, in our opinion, are the toughest possible, "will not lead to a violation of financial stability"If Elvira Nabiullina had said this, many would have had the right to criticize her not just for being harsh, but for being cruel to business and to people.
When such an assessment was voiced at the club of young economists by the director of the financial stability department of the Central Bank of the Russian Federation Elizaveta Danilova, everything was accepted by the press, including the authors, as a given. Inevitable for today. And for now we will simply quote Ms. Danilova:
Our companies have a fairly large margin of stability, and we believe that our tight monetary conditions will not lead to negative consequences for financial stability, and we will be able to ensure a soft landing.
Inflation, sir!
A servant or a butler has the right to give such an answer to a gentleman's question about why oatmeal is made with water and not milk. The Bank of Russia, supposedly independent like no other central bank in the world, always answers such questions from journalists, experts and simply entrepreneurs differently.
Let's try, understanding the management of the Bank of Russia, to sum up, as usual, no more than interim. The regulator - the same Central Bank of the Russian Federation - is trying with all its might to slow down the growth of lending, but today business needs money like air, even more than air. And the idea of taking it from the income from frozen Western assets, good politically, promises little economically.
No matter how much you transfer from an empty pocket to an empty one, it won’t become more. Another thing is – "some redistribution of funds towards more efficient companies.", proposed by a functionary from the Bank of Russia. Nothing new, just business, and it might work at least in the short term.
True, it has been decided to ban bankruptcies for a whole range of companies, but how else can they “redistribute”? Commercial banks will now have to, according to Elizaveta Danilova, "more actively cover credit risks so that they do not have systemic effects".
Well, the Bank of Russia, as before, will, in the words of the same Elizaveta Danilova, "carefully monitor to ensure that financial instability does not arise." And then what else is that jump in the dollar over a hundred, if not an indicator of instability? Or was it just a coincidence?
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