Nechaev: A “third wave” of inflation is possible in Russia in 2022

Today, the Central Bank raised the key rate immediately to 8.5% to curb inflation. The benefits of this event are not obvious, but the negative consequences are on the contrary: this opinion was expressed by ex-Minister of Economy of the Russian Federation Andrei Nechaev during the round table “Economic results of 2021: blunders and merits of the authorities” at the Rosbalt news agency.

“The Central Bank is doing what it can. He does not have many tools in terms of anti-inflationary policy. The trouble is that, according to the Ministry of Economy, inflation in our country is approximately determined by monetary factors only by a third. And two-thirds is non-monetary inflation. Incomes of the population have indeed grown slightly this year, plus consumer lending has been developing very actively, which has generated increased consumer demand. But due to the extremely unfavorable business climate, business was in no hurry to invest, increase production, fearing the magic phrase “we must share”. The gap between the increased demand and inadequately responding supply naturally led to higher prices. Add to this the global inflation we import. Plus the effect of the weakened ruble. Plus the anti-sanctions that artificially squeezed the offer several years ago. Together, this led to record inflation. But now the Central Bank is trying to fight non-monetary inflation using monitoring methods. The success of this event is not obvious, but the negative is completely obvious. Along with the key rate, loans are becoming more expensive, therefore, from the point of view of economic growth, this decision of the Central Bank will have a negative effect. Our growth has already slowed down. The factor of the rise in the price of money will contribute to its further slowdown, “Nechaev noted.

The interlocutor of the agency recalled that recently, First Deputy Prime Minister Andrei Belousov announced the possibility of a third wave of the global crisis in 2022. “I don’t know how right Belousov is about the third wave of the global crisis. I see no reason why the European, American, or even Chinese economies could go into decline. But as for the third wave of inflation in relation to Russia, here I am inclined to believe the Deputy Prime Minister. If I am right that the main factor of inflation is the unfavorable business climate in the country, then the policy of curbing inflation by increasing the key rate and raising the cost of loans will further constrict the supply. They are already saying that we will reach the inflation target of 4% not next year, but only in 2023. In 2022, inflation is clearly not going down to pre-crisis levels, “Nechaev emphasized.

Watch the full version of the conversation on Rosbalt’s Youtube channel.