High inflation in Russia is an indicator of the growing overheating of the economy, Bank of Russia Governor Elvira Nabiullina said at a press conference. This is reported by RBC.

“If no measures are taken to return the economy to a balanced growth trajectory, its overheating will intensify and lead to an uncontrolled acceleration of inflation and subsequent slowdown of economic growth up to recession. High inflation nullifies all the benefits of economic growth for people, threatening their real incomes and savings, thereby reducing living standards,” Nabiullina said.

The observed growth rates of the economy “in the current conditions it is wrong to consider sustainable and balanced”, she emphasized. According to the head of the Central Bank, overheating is a consequence of the growing imbalance between supply and demand. As the most vivid examples illustrating this process, Nabiullina named the increase in prices in the housing, motor transport and domestic tourism markets. The Central Bank’s announcement also referred to labor market deficits in many sectors.

At the press conference on the key rate, the head of the Bank of Russia Elvira Nabiullina wore a brooch with the image of scales. This may indicate that the Central Bank is looking for a balance in monetary policy and seeks balanced economic growth that will avoid overheating, RBC said.

The Central Bank of Russia’s Board of Directors raised the key rate from 8.5% to 9.5% at a meeting on Friday, February 11. The current value is the maximum since the spring of 2017.

The upward cycle lasts almost a year: since April 2021, the rate, then at 4.25%, has more than doubled. Today’s decision by the Bank of Russia coincided with market expectations. Most analysts surveyed by Bloomberg were counting on just such a scenario.