Central Bank Chief Outlines Faster Economic Restructuring and Policy Outlook
Elvira Nabiullina, head of the Central Bank, spoke at a joint session of State Duma committees about accelerating the economy’s restructuring in line with the Main Guidelines of the Unified State Monetary Policy for 2023 and the 2024–2025 period.
In recent months, global conditions have shifted toward a tougher, possibly protracted crisis. Nabiullina emphasized that this is not a moment to sit idle, waiting for events to unfold like bad weather at sea. The path forward requires active measures and adaptive thinking.
She described structural adjustment as varying across industries. The strategy includes seeking new foreign markets, identifying alternative suppliers of raw materials, components, and equipment, redirecting production toward domestic needs, increasing processing depth, and even changing the products themselves to fit evolving demand.
State that this is a highly complex, multifaceted undertaking. It is expected to take more than a year as the economy shifts to new configurations and competitive dynamics.
The Central Bank prepared a report on the evolving situation, drawing on the expertise of regulatory authorities to map potential scenarios and responses in light of the global crisis trajectory.
In a scenario where major central banks raise rates, it is unlikely that such moves alone will curb inflation in time. Higher, less predictable interest rates could slow global economic growth, depress asset values, and heighten financial stability risks. Under this outlook, geopolitical tensions may rise, economic fragmentation could intensify, sanctions against Russia may deepen, and these factors would further stress the global economy.
In Nabiullina’s assessment, the consequences could resemble a 2008–2009 crisis, marking a challenging period for Russia as it moves toward a new structural model for its economy. She warned that the path ahead will be demanding for the country.
Nevertheless, she pointed out that in the baseline scenario, while inflation is being addressed in many countries and global growth slows, a global recession is not a guaranteed outcome.
Sanctions and shock
Nabiullina also highlighted that the Russian banking system has endured this year’s shocks well, preserving lending capacity and a solid margin of safety. She noted that the system absorbed the initial blows effectively, maintaining its ability to support economic activity.
However, she cautioned that sanctions must not be underestimated. They are strong and their impact will be felt by both Russia and the wider global economy. Avoiding the effects is not a realistic option.
Nabiullina stressed that certain dynamics, such as global demand for Russian exports, remain beyond direct control. She explained that sanctions have disrupted Russia’s import and export geography and foreign economic ties that will need restoration. The situation is not improving; rather, it becomes more challenging as third-country damage sustains pressure from sanctions.
Discussing potential movements in the ruble, she warned against artificial depreciation aimed at helping exporters or funding budgets. If such a policy were to be pursued and widely expected by citizens and businesses, it could trigger a broader monetization across the economy and alter monetary conditions in ways that undermine financial stability. The institution favors a floating exchange rate as the most effective approach.
There are voices advocating for deliberate weakening of the currency. Nabiullina argued that such a move would erode confidence in the ruble, reduce the incentives to hold savings locally, and provoke broader economic adjustments that would complicate policy management.
Key rate trajectory
The Central Bank expects to return to a neutral interest rate in the 5–6 percent range in 2025. The neutral rate is described as the level that neither accelerates nor slows inflation when the economy operates at its potential, according to the bank’s framework.
Forecasts from the Central Bank project inflation at about 12–13 percent by year’s end, easing to 5–7 percent by the end of next year, and returning to the 4 percent target over time.