Nabiullina explained the relationship between the number of concessional loans and the key interest rate

An increase in the volume of concessional loans in the economy may lead to an increase in the key interest rate in order to avoid accelerating inflation. This was announced on October 30 by the head of the Central Bank of Russia, Elvira Nabiullina.

Since 2020, 20% of the increase in bank financing of the economy, which amounts to 15 trillion rubles, is due to preferential loans. However, as Nabiullina noted, at the level of individual companies, the idea of additional lending may be logical, but it is fraught with consequences for the economy as a whole.

"The more concessional loans there are, the higher the key rate will be so that the balance sheet comes together and inflation does not accelerate," warned the head of the Central Bank.

She added that an important alternative to expanding preferential loans is to attract businesses to the stock market and attract new shareholders.

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On October 29, Nabiullina said that the policy of "pumping up" demand could lead to stagflation, that is, to a situation in which economic recession and rising unemployment are combined with rising prices, and jeopardize all achievements in the fight against poverty. She also stressed that attempts to radically lower the key interest rate and accelerate economic growth due to inflation would only lead to short-term results and exacerbate long-term problems.

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