CEOInterviews.AIRUSSIA ECONOMY LIVE | Central Bank Governer Nabiullina Breaks Silence On Russia's Wartime Crisis

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Elvira Nabiullina0:00

Budgetary and monetary policy simultaneously affect aggregate demand. If the contribution of budgetary policy is growing to achieve priority tasks, then monetary policy must play the role of a stabilizer, and its tightness must adjust accordingly to reduce the contribution of credit to aggregate demand. Only in this case can we avoid aggregate demand overshooting the economy's capacity to increase supply, which would trigger another round of inflation. Risks from labor shortages and inflation expectations persist. Pro-inflationary risks have increased, linked to temporary supply reductions in certain industries. And the risks related to external conditions I have already mentioned. A disinflationary risk remains the possibility of weaker domestic demand dynamics compared to our baseline projections. And finally, regarding our future decisions. Current price growth rates have notably slowed, but we observe growing risks that could lead to accelerated inflation in the future. Particularly important for us are those that could sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags. Therefore, our decisions must be forward-looking. I emphasize that neither further key rate reductions nor the size of each step at any particular meeting are predetermined. We may need pauses to assess all incoming information and the effect of our previous decisions. Only maintaining a balanced approach, especially amid high uncertainty, will allow us to achieve a sustainable result and stabilize inflation at a low level. Thank you for your attention.

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Moderator2:00

Thank you, colleagues. Please, your questions, and don't forget to introduce yourselves and name your publication. Masha, please. First row.

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Maria Stepanova2:10

Good day. Maria Stepanova, Informagent. What options were considered today? You already said that further steps are not predetermined, but has the probability increased that you would use a 25 basis point cut again? Thank you.

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Elvira Nabiullina2:27

Thank you. The question is a traditional one for us. This time, three rate options were seriously considered: leaving the rate at 14.5%, a 25 basis point cut to 14.25%, and a 50 basis point cut to 14%. By the way, all these options appeared in economists' questions. There were weighty arguments for each option, and a significant number of participants in the discussion expressed their views. In my opinion, the final decision was a truly balanced consideration of all arguments, including from the perspective of the cost of error. To generalize, the positions of discussion participants differed on three main parameters. First, the assessment of how sustainable the observed stable inflation indicators over recent months truly are. Second, the assessment of the scale of additional pro-inflationary factors that emerged since the last board meeting — on the demand side, shifts in budget plans for 2026 and subsequent years, and on the supply side, temporary production reductions in fuel. The third parameter is the assessment of how tight monetary conditions are, which is important given the significant acceleration of lending growth in the last two to three months. Practically all participants noted that room for further rate cuts has narrowed. But the extent to which it has narrowed was and apparently will be a subject of discussion at the next meeting.

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Anastasia Saveleva4:35

Thank you. Anastasia Saveleva, Interfax. You already said that room for further rate cuts has narrowed. Could you say how much the budget factor influenced this? And do you see risks that this room could shrink further due to the situation on the fuel market, which could have secondary effects — rising prices for other goods such as food — and could lead to increased inflation expectations?

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Elvira Nabiullina5:15

We generally assess that the room for reducing the key rate has decreased. This will be discussed in detail at the next meeting, which is an anchor meeting. But the factors that influence this — the specific value of these factors — are hard to measure. We note that pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it is very important how the situation develops and whether these factors, which may be one-off, could translate into sustained price pressure, primarily through increased inflation expectations. Obviously, gasoline is a marker good. In June surveys, this effect has not yet appeared. We will look at July surveys on inflation expectations, which will be released before the next meeting. It will be important to see how this is reflected in costs across a wide range of goods. These are factors that should be assessed. I repeat, this was indeed one of the main factors in making a balanced decision and reducing the pace of rate cuts.

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Moderator6:32

Colleagues, please. Pavel.

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Pavel6:38

Pavel. Thank you. You noted in the press release that a higher key rate trajectory may be needed. Does this relate to 2028? Thank you.

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Elvira Nabiullina6:53

We will present our new view of the key rate trajectory, as I said, at the anchor meeting, and assess the dynamics for 2026, 2027, and 2028. Most likely, the changes will primarily affect 2026 and 2027, but this still needs to be reviewed and calculated. Yes, please, Alexey Borisovich.

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Alexey Borisovich7:17

Without prejudging the July meeting, because obviously the entire forecast is influenced by all factors, not just those that have changed to date, we must proceed from the assumption that if in 2028, say, budgetary policy is still not in a zero structural primary deficit mode, this would mean that monetary policy would most likely not be fully neutral in 2028 either, because it would need to compensate for that. All else being equal — and this includes how this change in budget policy will impact things — we will assess whether we will be at the neutral rate level. We do this annually before presenting the main directions of monetary policy. So indeed, we cannot give specific figures now, but by the next meeting, I think there will be more clarity on this matter.

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Moderator8:24

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov8:29

Good day. Nikita Mitrofanov, Telegram channel Economical. I continue to develop my macroeconomic model that tries to predict your decisions. Today the model predicted a 70% probability of a 50 basis point cut and a 30% probability of a 25 basis point cut. The model's decision was mainly based on inflation calculations, and my calculated figures were actually worse than in your press release. Reality turned out better. It seems to my model that a 50 basis point cut would have been more likely. But despite this, the 30% probability was due to the fact that population inflation expectations remain quite high, unemployment is quite low, and a new factor emerged that was prominently highlighted — the structural deficit of the Russian Federation budget. In this context, I would like to ask: what influence does the budget channel have on money supply growth, and how does monetary policy and its tightness affect this, since this is a factor that influences things but increasingly it seems that monetary policy and the rate decision primarily affect the private sector and less so the budget channel. Thank you.

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Elvira Nabiullina9:58

Naturally, we primarily influence the pace of lending growth, and market lending above all. That is why we always emphasize the importance of subsidized lending, because subsidized loans are largely insensitive to our rate decisions. It is clear that we influence primarily private credit. Our monetary policy does of course affect the budget, because the budget has internal debt, servicing costs, plus subsidized programs where the budget has taken on significant interest rate risk. But overall, monetary policy does not have a direct impact on the budget channel. Rather, it is the opposite — there are budget decisions being prepared by the government and adopted by the Duma to fulfill priority tasks. And in this situation, with full utilization of resources, the Central Bank plays a compensating role. We must accept as given the amount of money flowing through the budget channel and adapt our monetary policy so that the amount of money entering the economy through the private credit channel does not accelerate inflation. The complexity is also that our decisions work with lags. I mentioned this lag. Today's decisions will manifest over three to six quarters. That is why we emphasize the importance of earlier predictability of budget policy. There is an interconnection, but it is more of a stabilizer role on our part.

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Moderator11:58

Thank you. The next question is online from Sergey Enkvist, publication NGS55, Omsk. Has the Central Bank revised its key rate forecast after statements at the St. Petersburg International Economic Forum that by year-end it should reach single digits?

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Elvira Nabiullina12:19

No. First, I recall that we do not currently revise the key rate forecast. We revise it at anchor meetings. The next one will be in July, when we generally revise the forecast, because the rate forecast depends on how we overall revise our vision of the future situation. Regarding a single-digit rate level, our April forecast did not imply reducing the key rate to single digits — below 10% — this year. I said that pro-inflationary risks have actually grown, and if the key rate trajectory forecast is revised, it would more likely be upward, not downward. And the room for reducing the key rate through the end of this year and perhaps into next year — the question about 2028 was already asked — has most likely shrunk. And not because we think additional cooling of aggregate demand is needed, but because government demand will make a larger contribution in 2026 and 2027 to both demand and GDP growth. This means the private sector's contribution must be more restrained; otherwise, all this demand stimulus will simply lead to accelerated inflation again. We must not allow this, because everyone loses: the population and businesses alike. Even those currently requesting faster rate cuts would face rising costs. And with accelerating inflation, market rates will not fall — they will rise. Therefore, our task is to prevent this situation. We certainly listen to and hear business experts and their arguments, including those expressed at the forum, and include them in the list of views discussed at the board of directors. But we make decisions based on our own independent analysis of data. We analyze a large volume of data — not only statistical and not only current data, but again I emphasize, the medium-term forecast considering monetary policy lags.

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Moderator15:07

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov15:13

Evgeny Grachov, Izvestia newspaper. In conditions where representatives of various agencies and businesses increasingly talk about the need for more active key rate cuts, is the Bank of Russia experiencing additional pressure on monetary policy matters? And have regulators, against the backdrop of these discussions, recently begun considering a broader range of economic indicators when making decisions, particularly those related to growing risks for businesses? Thank you.

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Elvira Nabiullina15:39

I already said that we certainly take into account the opinion of experts and businesses. There are many voices in favor of rate cuts. They are quite understandable. There are indeed many, not only from agencies but from businesses as well. But we do not perceive this as pressure. I have said this repeatedly, and we make decisions independently based on our own analysis. We have always considered and continue to consider a broad range of indicators — not only inflation and inflation expectations, but also the labor market and economic activity, broken down by industry and region. We pay particular attention to business surveys. I recall our regular monitoring of 15,000 enterprises, the results of which are publicly available. There is a lot of interesting data there. We conduct business meetings. A broad range of indicators is discussed. Sometimes I hear a somewhat simplified view — for example, about the labor market, that the Bank of Russia reduces everything to unemployment. This is absolutely not so. In my speeches and those of my colleagues, we consistently emphasize that we look at a large volume of data characterizing the labor market situation — temporary employment, downtime, resumes, vacancies, wage growth rates relative to productivity, broken down by industry and region. So for each direction, it is a long list of data we use. And your question is indeed correct because when making decisions, one needs to use the entire complex of data characterizing the economic situation.

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Moderator17:35

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna17:40

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I cannot help but ask — your prolonged absence generated many rumors about personnel changes, about you wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina17:57

I can only confirm that I indeed had a cold and lost my voice for a period of time. The only thing I can say is to thank those who sincerely worried about my health.

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Moderator18:13

Colleagues, please. Georgy.

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Georgy Nedogibchenko18:17

Georgy Nedogibchenko, RBC. Is it known to the Bank of Russia, and is it participating in discussions about tightening budget rule parameters for 2027, with a reduction of the cutoff price to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina18:37

Our position has not changed. First, we consider the budget rule to be a fundamental basis for macroeconomic stability. The current base price is somewhat high from the perspective of a conservative assessment of long-term oil market trends. In our view, it should be lowered to ensure long-term budget stability of public finances and macroeconomic stability. Of course, the government will propose the specific cutoff level. But it should be said that with a lower base price in the budget rule, monetary policy would have greater room for macroeconomic stability. Monetary policy will take this into account when we discuss our decision. Alexey Borisovich, we have a good understanding of this discussion and its implications for monetary policy decisions now, taking into account what will happen with the budget rule in 2027.

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Moderator19:52

Thank you. Colleagues, please. Yulia.

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Yulia Rostorgoeva19:57

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, according to US authorities, is concluded. Oil is becoming cheaper. What risks do you see for the Russian budget, balance of payments, and the economy as a whole in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina20:20

When you talk about balance of payments risks from the conflict ending, you probably mean that oil prices may start to decline. But these risks are neutralized or compensated by the actions of the budget rule, which we discussed. Therefore, from this perspective, we probably do not see significant risks. As for the overall impact — the aggregate effect is probably still difficult to assess because evaluating the consequences of the conflict, even if it is ultimately concluded, on the world economy and global inflation is premature. We see that in many countries it has already affected price growth and economic dynamics, which could also influence the Russian economy through future demand for our goods. So far, the impact of this crisis has been disinflationary because exporters' revenue grew and the exchange rate strengthened. But there are also pro-inflationary effects — rising logistics costs for our businesses and higher import prices. Pro-inflationary risks exist too. We said that the longer the conflict continues, the greater the pro-inflationary risks. We currently assess that if the conflict ends, pro-inflationary risks from this side decrease compared to our earlier expectations.

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Moderator21:58

Thank you. The next question is online from Marina Ukhapova, Nizhegorodskaya Pravda newspaper, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova22:07

Hello. The course toward key rate reduction has been maintained for a year now. What effect has this had on the lending market? Perhaps more accessible business loans, mortgage availability, new credit offerings?

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Elvira Nabiullina22:24

Yes, the key rate reduction has led to increased lending. We see this in the market lending segments. For example, in four months — January through April — we issued almost four times more market-rate mortgages than in the same period last year. In the corporate lending market, non-subsidized lending volumes have also grown. And we regularly survey businesses and see that companies have been citing the lack of working capital financing less frequently among their main current difficulties. Specifically, the share of such enterprises has dropped to 10% — nearly 1.5 times lower than before we started cutting rates. Now we see that last year's key rate increase and high interest rates were a bitter but absolutely necessary medicine. A year ago, according to the same surveys, the key concern for businesses was rising costs — essentially inflationary risks. Every fourth company we surveyed complained about it then. The sharpness of the cost increase issue has now decreased — not disappeared, but decreased. Now one in five companies mentions it, which is a direct consequence of lower inflation achieved through tight monetary policy.

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Moderator24:21

Colleagues, please. Zulfia, I see your hand.

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Zulfia Khamitova24:26

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary assessment of GDP since the beginning of the year? And do you see risks of economic overheating, and what key rate is needed in Russia for economic activity to grow at a higher pace? Thank you.

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Elvira Nabiullina24:42

According to our estimates, overall in the first half the economy continues moderate growth, as I already mentioned. For the first quarter, Rosstat's estimate — which you know — showed GDP declined by 0.2%, but we said this was largely due to seasonal and calendar factors. April already brought GDP back into positive territory. Overall, we estimate economic growth for January through April at 0.3%. For the first half, we expect about half a percentage point. According to operational data, business activity across the country continued growing in May. I already said we see an acceleration in consumer activity. We do not see risks of economic overheating. I recall the main overheating markers we use — and not just us, most economists use them everywhere — are inflation falling significantly below target, rising unemployment, and declining real incomes. None of these markers are present. A balanced monetary policy is helping protect the economy from such a situation. As for your question about what rate level is needed for higher economic growth — for the economy to grow sustainably at high rates, it is not about the rate level. What is needed are mechanisms and institutions that stimulate the development of productive capacity and increase labor productivity. This is primarily determined by the efficiency of using production factors.

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Moderator26:42

Colleagues, please. Artem.

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Artem Gorun26:48

Good day. Artem Gorun, Investfuter. My question concerns the labor market, which we have already touched on. We see unemployment remains near historical lows, but the picture is contradictory because large companies continue reducing their workforce. At the same time, the Ministry of Labor estimates that about 7.5% of job functions could be replaced by artificial intelligence in the near future. There seems to be a contradiction here. How do you assess these changes? Does this show that labor market tension is beginning to ease — which you have been expecting for so long as one of the main factors? And how might this affect your overall assessment and possible rate decisions? Thank you.

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Elvira Nabiullina27:33

There are indeed certain signs of labor market cooling, but I noted that we see the pace of tension reduction is slowing. We see in surveys that in recent months, the share of enterprises experiencing labor shortages has not declined over the last couple of months. We do note cases of workforce release and idling at some enterprises. These cases certainly attract attention, but their scale nationally remains small and not growing — about 0.3% of all employed. So there are layoffs, but the fact that unemployment is not rising shows that if there were cuts at some companies, workers are finding jobs elsewhere. Regarding artificial intelligence, we do not yet see a macroeconomic effect on the labor market. It has not yet played a decisive role, though for individual companies it increases productivity when they skillfully use AI. The impact of this factor will likely increase over years. But the most general point I want to emphasize is that the labor market is an important factor in rate decisions, but not the only one. We consider the entire set of factors affecting the economy and inflation.

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Moderator29:25

Marina, yes, please.

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Marina Pimionova29:29

Marina Pimionova, NTV, Delovye Novosti. Continuing the theme of business pressure, and a bit of sports — the FIFA World Cup is currently underway. In football there is a concept called an own goal — scoring against your own team. Why can't the Central Bank convince businesses — many financially literate people — that it is not scoring an own goal against the Russian economy? Thank you.

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Elvira Nabiullina29:53

Yes, well, you know, we rather feel like the goalkeeper, defending against inflation. And many matches are decided precisely by the reliability of the goalkeeper. Someone must protect these goals. Alexey Borisovich, anything to add?

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Alexey Borisovich30:21

I can only recall the Russia-Croatia match in 2018. Its result was decided on penalties thanks to the reliability of our goalkeeper.

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Moderator30:41

Colleagues, please. Nastya, second row.

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Anastasia Bashkatova30:46

Hello. Thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank present as convincing evidence to the public of its monetary policy's effectiveness? And second part: given that reaching the 4% inflation target remains challenging, how does the Central Bank relate to proposals from some experts to calculate and consider in monetary policy not the usual overall consumer inflation, but a different inflation measure cleaned of factors that strongly changed the economic situation after 2022 — specifically the special military operation in all its manifestations, or the impact of stricter sanctions, and so on? Thank you.

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Elvira Nabiullina31:35

Thank you. You are absolutely right about convincing indicators. The criterion of truth is fact. So let us look at facts, including annual inflation. Annual inflation over the past year has halved. This did not happen by itself. It was not a lucky coincidence — circumstances were actually working in the opposite direction, with pro-inflationary risks materializing. This is primarily the result of monetary policy. But you are right that this effect is sometimes questioned. Perhaps some forget that the rate works with a lag. It may seem to them: high rate, high inflation, we start cutting the rate, inflation falls. But when we raised the rate, the effect acts over three to six quarters. The fact that inflation has relatively slowed today is of course due to the high rate we maintained for an extended period, starting from 21%. If things were different — say we held the rate at 21% for a sufficiently long time — inflation started declining even while the rate was high, from October 2024 through last summer. So the logic that high rates cause inflation to grow does not withstand criticism. With the rate increase, inflation began to decline after peaking last March in the spring. And seeing sustained inflation deceleration, we are cutting the rate. Now the important question: many experts suggest we should not orient on overall inflation indicators but on stable inflation indicators cleaned of everything that is growing, saying 'this is what remains after cleaning, and then cut the rate.' But you can clean inflation any way you like. We actually show inflation figures cleaned of housing utility tariff increases, cleaned of tourism services impact, and so on. We have many such measures, but interest rates will not become lower because of that. If overall inflation is 10%, and your cleaned inflation is 2%, credit rates will not be 2% — they will be above 10% regardless. If we want more moderate rates, we must reduce overall inflation. And it doesn't matter to people what is driving high inflation. The purchasing power of their savings and incomes is determined by overall price growth across everything. We can say that prices didn't rise for this particular item, but they rose for everything else. For people this is very important too. So in our view, analytically one can look at any cleaned measures, but the focus must be on reducing overall inflation and overall price pressure.

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Alexey Borisovich34:54

And it is clear that monetary policy cannot affect the root causes of inflation related to supply-side changes. But what it can do is bring demand in line with these circumstances, and then inflation will be low and rates will be moderate.

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Moderator35:17

Colleagues, please. Dmitry.

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Dmitry Maroko35:21

Dmitry Maroko, Rossiya 24. This week the court denied Uralkali's petition to suspend enforcement proceedings in the lawsuit filed by the Central Bank. What does this mean in practice? Does this bring us closer to the return of frozen assets? Thank you.

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Elvira Nabiullina35:38

I can probably only repeat the general formula here, because we do not disclose details. I confirm again that we do not disclose details or tactics. We will take all measures and use all legal means to protect our legitimate rights.

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Moderator35:58

Colleagues, please. Yakov.

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Yakov Timakov36:03

Good day. Yakov Timakov, Ekspert magazine. Alexey Borisovich recently compared the actions of Elvira Nabiullina to the Volcker shock — the head of the Fed in the 1970s-80s. Volcker was known as a proponent of tight monetary policy, resulting in sustained low inflation on one side and recession on the other. I am not drawing direct parallels, since the Central Bank's arguments about sectoral decline are convincing, and not everyone agrees with the recession thesis. My question is not about the current situation but about long-term consequences. After the Volcker shock in the US came the equally famous Reaganomics — tax cuts, deregulation, currency flexibility including through foreign investors. Russia's situation is, to put it mildly, different. There are not many preconditions for our own Reaganomics. In recent times the government is taking measures on fuel, but restoring supply may take time. Rising gasoline prices may also affect inflation expectations, as this is a sensitive good for both people and businesses. Additionally, in recent weeks there has been a reversal in fruit and vegetable price dynamics after an atypically strong decline in the spring. We already see this in operational data. And to conclude on the inflation topic, I would like to draw attention to the statistical effect that will impact annual inflation in the coming months. In July there will be no utility tariff increases as in previous years — their indexation has been moved to October. This means annual inflation may temporarily decline slightly due to this factor, but this will only be a redistribution of price growth within the year.

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Elvira Nabiullina38:00

Second, regarding the economy. According to operational data, in the second quarter of 2026, as we expected, economic activity indicators are improving. Temporary factors that constrained it at the start of the year — including calendar and weather factors — have been exhausted or reversed. In particular, there is a certain revival in construction after a cold and snowy winter, which was the main source of the first quarter GDP decline. Analyzing economic dynamics overall for the first half, it corresponds to moderate growth in goods and services output. At the same time, the situation varies greatly by industry, and this heterogeneity has grown over the past year. This is largely related to the structural restructuring of the economy. As government demand accelerates substantially, room for expanding private demand — investment and consumer — becomes more limited amid constrained resources. Certain contribution to enhanced industrial heterogeneity comes from shorter-term factors such as global commodity market conditions and temporary loss of individual processing capacities. Regarding consumer activity, its moderate growth continues. In spring months, automobile purchases picked up. Demand remains high in the services segment. Consumption is supported by wage growth, which has somewhat slowed, and enterprises in their plans are incorporating increasingly moderate indexation going forward. Additionally, there is significant dispersion in wage dynamics across industries and types of activities, reflecting the economic heterogeneity I mentioned. Overall, labor market tension is declining slowly. According to information from our regional offices, in a number of regions, the reduction in labor shortages has paused in recent months. In these conditions, for a sustainable reduction in cost and price pressure, further convergence of wage growth and productivity is needed. I want to emphasize that to increase productivity, the main requirement is that workers are maximally utilized where it brings the greatest return for the economy. Third, monetary conditions. Interest rates in most segments of the financial market continued to decline smoothly under the influence of previous monetary policy decisions. At the same time, long-term OFZ yields rose somewhat, reflecting the increased term premium associated with uncertainty regarding budget policy. I note that most loans to companies, especially large and medium-sized ones, are now issued at floating rates. For such loans, a key rate reduction translates into reduced interest payments immediately and in full, not only for new loans but also existing ones. The savings rate, although declining slightly, remains sufficiently high. Ruble household deposits in banks continue to grow. Among bank products, savings accounts are gaining popularity, and citizens' interest in financial market instruments and non-financial instruments continues to rise. In April-May, credit growth accelerated noticeably. In retail, there was an activation of unsecured and auto lending, as well as market-rate mortgages. Corporate credit growth rates have increased significantly. The dynamics of monetary indicators currently require special attention from us. First, if the credit acceleration proves to be a sustainable trend rather than a short-term spike after low values at the start of the year, this may indicate that current monetary conditions are no longer perceived by borrowers as restrictive. Second, the budget policy's contribution to money supply growth remains elevated, and with the revision of budget parameters, will be even larger than we previously assumed. If under these conditions credit growth continues at such high rates, it may require a tighter policy than assumed in the baseline scenario. The combined impact through the budget and credit channels has already led to money supply growth at the upper bound of our expectations, and even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightness than was incorporated in our April forecast. Now regarding external conditions. The situation in the Middle East led to commodity price increases. These changes have already begun to translate into accelerated inflation in many countries. Several central banks responded to rising pro-inflationary risks by raising rates. Growth expectations for the global economy are declining. For the Russian economy, disinflationary effects have so far predominated. Higher commodity prices led to increased export revenue and ruble strengthening. Import demand also grew but not as significantly as the value of export volumes. Risks of the Middle East conflict prolonging have decreased, but uncertainty remains regarding the scale of its pro-inflationary consequences for the global economy. These could affect the Russian economy through imported goods prices and logistics costs. Moving to risks overall. According to our estimates, their balance has shifted more strongly toward pro-inflationary. Regarding the risk of budget policy parameter revision, it can be said that it is essentially already materializing, but uncertainty remains regarding its scale. Budgetary and monetary policy simultaneously affect aggregate demand. If the contribution of budgetary policy is growing to achieve priority tasks, then monetary policy must play the role of a stabilizer, and its tightness must adjust to reduce the contribution of credit to aggregate demand. Only in this case can we avoid aggregate demand overshooting supply capacity and triggering another round of inflation. Risks persist from labor shortages and inflation expectations. Pro-inflationary risks have increased, linked to temporary supply reductions in certain industries. And risks related to external conditions I have already mentioned. A disinflationary risk remains weaker domestic demand dynamics than our baseline projections. And finally, regarding our future decisions. Current price growth rates have notably slowed, but we observe growing risks that could lead to accelerated inflation in the future. Particularly important for us are those that could sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags. Our decisions must be forward-looking. I emphasize that neither further key rate reductions nor the size of steps at each particular meeting are predetermined. We may need pauses to assess all incoming information and the effect of our previous decisions. Only maintaining a balanced approach, especially amid high uncertainty, will allow us to achieve a sustainable result and stabilize inflation at a low level. Thank you for your attention.

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Moderator46:13

Thank you, colleagues. Please, your questions, and don't forget to introduce yourselves and name your publication. Masha, please. First row.

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Maria Stepanova46:23

Good day. Maria Stepanova, Informagent. What options were considered today? You already said further steps are not predetermined, but has the probability increased that you would again use a 25 basis point cut? Thank you.

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Elvira Nabiullina46:40

Thank you. The question is a traditional one. This time, three rate options were seriously considered: leaving the rate at 14.5%, a 25 basis point cut to 14.25%, and a 50 basis point cut to 14%. By the way, all these options appeared in economists' questions. There were weighty arguments for each, and a significant number of discussion participants expressed their views. In my opinion, the final decision was a truly balanced consideration of all arguments, including from the perspective of the cost of error. To generalize, discussion participants' positions differed on three main parameters. First, the assessment of how sustainable the observed stable inflation indicators over recent months truly are. I said 'sustainable' twice — we have indicators of stable inflation and need to understand how truly sustainable they are. Second, the assessment of the scale of additional pro-inflationary factors that emerged since the last board meeting — on the demand side, shifts in budget plans for 2026 and subsequent years, and on the supply side, temporary production reductions in fuel. The third parameter is the assessment of monetary condition tightness, important given the significant acceleration of lending growth in the last two to three months. Practically all participants noted that room for further rate cuts has narrowed. But the extent to which it has narrowed was and will likely remain a subject of discussion at the next meeting.

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Anastasia Saveleva48:48

Thank you. Anastasia Saveleva, Interfax. You already said room for further rate cuts has narrowed. Could you say how much the budget factor influenced this? And do you see risks that this room could shrink further due to the fuel market situation, which could have secondary effects — rising prices for other goods such as food — and could lead to increased inflation expectations?

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Elvira Nabiullina49:27

We generally assess that the room for reducing the key rate has decreased. This will be discussed in detail at the next anchor meeting. The factors influencing this — their specific values — are hard to measure, but we note that pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it is very important how the situation develops and whether these one-off factors could translate into sustained price pressure, primarily through increased inflation expectations. Gasoline is a marker good. In June surveys, this effect has not yet appeared. We will look at July surveys on inflation expectations, which will be released before the next meeting. It will be important to see how this is reflected in costs across a wide range of goods. These are factors that should be assessed. I repeat, this was indeed one of the main factors in making a balanced decision and reducing the pace of rate cuts.

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Moderator50:45

Colleagues, please. Pavel.

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Pavel50:51

Pavel. Thank you. You noted in the press release that a higher key rate trajectory may be needed. Does this relate to 2028? Thank you.

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Elvira Nabiullina51:06

We will present our new view of the key rate trajectory at the anchor meeting, as I said, and assess the dynamics for 2026, 2027, and 2028.

...which may be needed for 2026, 2027, and 2028. Most likely changes will primarily affect 2026 and 2027, but we still need to review and recalculate. Yes, please, Alexey Borisovich.

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Alexey Borisovich51:30

Without prejudging the July meeting — all factors affect the overall forecast, not just those that have changed recently. If in 2028 fiscal policy remains outside the zero structural primary deficit mode, monetary policy most likely won't be fully neutral, as it would need to compensate. We assess the neutral rate annually before presenting key monetary policy directions. We can't give specific figures now, but there should be more clarity by the next meeting.

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Moderator52:38

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov52:42

Good day. Mitrofanov Nikita, Telegram channel Economic. My macroeconomic model predicted a 70% probability of a 0.5% rate cut and 30% for 0.25%. My calculated inflation data was even worse than your press release — reality turned out better. I'd like to ask: what influence does monetary policy have on money supply growth through the budget channel? It increasingly seems that monetary policy primarily affects the private sector rather than the budget channel.

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Elvira Nabiullina54:11

Our decisions primarily affect market lending growth. Subsidized loans are largely insensitive to rate decisions. Our monetary policy does affect the budget through debt servicing and subsidized programs, but overall doesn't have a direct impact on the budget channel. Rather, the Central Bank plays a compensating role — adapting policy to prevent inflation through the private credit channel while taking budget flows as given. Our decisions operate with a three-to-six quarter lag, which is why fiscal policy predictability is important. The connection exists, but we act as a stabilizer.

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Moderator56:12

The next online question is from Sergey Enkvist, NGS55, Omsk: Has the Central Bank revised its key rate forecast after the St. Petersburg International Economic Forum stated that by year-end it should become single-digit?

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Elvira Nabiullina56:33

No. We haven't revised the rate forecast — we do this at key meetings, the next one in July. Our April forecast didn't assume cutting below 10% this year. Pro-inflationary risks have increased; if revised, the trajectory would more likely shift upward. Room for cuts has shrunk — not because aggregate demand needs more cooling, but because government demand will increase its GDP contribution in 2026–2027, requiring more restrained private sector contribution. Otherwise, stimulus will simply accelerate inflation, which everyone loses from. We incorporate expert opinions but make decisions based on independent analysis, considering the full range of data including medium-term forecasts with policy lags.

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Moderator59:20

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov59:26

Evgeny Grachov, Izvestia newspaper. Is the Bank of Russia experiencing additional pressure on monetary policy amid growing calls for rate cuts from businesses and agencies? Have regulators begun considering a broader range of economic indicators when making decisions, particularly those related to increased business risks?

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Elvira Nabiullina59:52

We certainly consider business and expert opinions, and voices for rate cuts are understandable. But we don't perceive this as pressure. We make decisions independently based on our own analysis. We've always considered a wide range of indicators — inflation, inflation expectations, labor market, economic activity by industry and region. We pay special attention to business surveys and our regular monitoring of 15,000 enterprises. It's a misconception that we reduce everything to unemployment — we look at extensive labor market data including temporary employment, downtime, vacancies, wages relative to productivity, all by industry and region. Your question is correct: decisions must use the full range of economic data.

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Moderator1:01:48

Thank you, colleagues. Elena Fabrichna.

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Elena Fabrichna1:01:54

Elena Fabrichna, Reuters agency. We're very glad to see you in good health. Your prolonged absence generated many rumors about personnel changes and about you wanting to leave. Can you refute them?

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Elvira Nabiullina1:02:11

I can only confirm that I did have a cold and lost my voice for some time. The only thing I can say is to thank those who sincerely worried about my health.

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Moderator1:02:26

Colleagues, please, Georgy.

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Georgy Nedogibchenko1:02:31

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of discussions about tightening budget rule parameters for 2027, with lowering the cutoff price to $50 per barrel? How would such parameters affect monetary policy?

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Elvira Nabiullina1:02:50

Our position hasn't changed. The budget rule is a fundamental basis for macroeconomic stability. The current base price is somewhat high from a conservative long-term oil market perspective and should be lowered for fiscal and macroeconomic stability. The government will propose the specific cutoff level. With a lower base price, it would provide stronger grounds for stability. Monetary policy will take this into account. Alexey Borisovich, we have a good understanding of how this discussion is proceeding regarding what will happen with the budget rule in 2027.

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Moderator1:04:05

Thank you, colleagues. Please, Yulia.

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Yulia Rostorgoeva1:04:10

Good day. Yulia Rostorgoeva, Market Power. The Iran conflict, according to U.S. authorities, is ending and oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and economy? How do you assess this three-month confrontation's medium-term impact on the Russian economy?

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Elvira Nabiullina1:04:33

Balance of payments risks from the conflict ending are neutralized by the budget rule we discussed. We don't see significant risks from that perspective. Overall impact is still difficult to assess — evaluating consequences for the global economy and inflation is premature. The crisis has been disinflationary for Russia: higher export revenue strengthened the ruble. But there are pro-inflationary effects too: logistics costs and import prices. The longer the conflict, the greater the pro-inflationary risks, so ending it reduces those risks compared to previous expectations.

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Moderator1:06:11

Thank you. Next online question from Marina Ukhapova, Nizhegorodskaya Pravda, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova1:06:21

Hello. The course toward key rate cuts has been maintained for a year. What effect has this had on the credit market — affordable business loans, mortgage accessibility, new credit products?

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Elvira Nabiullina1:06:38

Rate cuts led to lending growth. January–April saw almost four times more market mortgages than the same period last year. Corporate non-subsidized lending also grew. Our surveys show businesses are less frequently citing lack of working capital financing — the share fell to 10%, almost 1.5 times less than before rate cuts. A year ago, the key business concern was rising costs — essentially inflationary risks — with every fourth company complaining. Now one-fifth mention it, a direct consequence of inflation reduction from tight monetary policy.

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Moderator1:08:34

Colleagues, please, Zulfia — I see a hand.

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Zulfia Khamitova1:08:40

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary GDP estimate since the start of the year? Do you see overcooling risks, and what key rate is needed for higher economic growth rates?

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Elvira Nabiullina1:08:55

By our estimates, the economy continues moderate growth in the first half. Q1 GDP fell 0.2% largely due to seasonal and calendar factors, but April brought GDP to positive territory. January–April growth is estimated at 0.3%; we expect around half a percentage point by mid-year. Business activity continues growing, consumer activity accelerating. We don't see overcooling risks — none of the key markers (inflation well below target, rising unemployment, falling real incomes) are present. For sustainable high growth, the issue isn't the rate level — what's needed are mechanisms stimulating production capabilities and productivity improvements.

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Moderator1:10:55

Colleagues, please, Artem.

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Artem Gorun1:11:01

Gorun Artem, Investfuture. Unemployment remains near historic lows, but the picture is contradictory — large companies continue staff reductions, while the Ministry of Labor estimates 7.5% of jobs could be replaced by AI soon. Do these contradictions show labor market tension is easing, and how might this affect rate decisions?

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Elvira Nabiullina1:11:47

There are signs of labor market cooling, but the pace of tension reduction is slowing. Staff shortages haven't declined in the past couple of months. Layoffs at some enterprises attract attention, but nationwide scale is still small — about 0.3% of all employed. Unemployment isn't growing, showing workers are finding jobs elsewhere. We don't yet see a macroeconomic AI effect on the labor market; for individual companies it increases productivity when skillfully used, and this influence will grow over years. The labor market is an important but not the only factor in rate decisions — we consider the full range of factors.

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Moderator1:13:38

Marina, yes, please.

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Marina Pimionova1:13:42

Marina Pimionova, NTV Delovye Novosti. With the World Cup underway, in football there's an 'own goal' — scoring in your own net. Why can't the Central Bank convince businesses and financially literate people that it's not scoring own goals against the Russian economy?

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Elvira Nabiullina1:14:06

We rather feel like we're the goalkeeper defending against inflation. Many matches are decided precisely by goalkeeper reliability — someone has to protect those goals. Alexey Borisovich, anything to add?

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Alexey Borisovich1:14:32

I can only remind you of the Russia–Croatia match in 2018, where the result was decided in a penalty shootout thanks to our goalkeeper's reliability.

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Moderator1:14:54

Colleagues, please, Nastya, second row.

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Anastasia Bashkatova1:14:59

Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank present as convincing evidence of monetary policy effectiveness? And second: given the difficulty reaching the 4% inflation target, how does the Bank view proposals to calculate 'cleaned' inflation removing post-2022 factors like the military operation and harsher sanctions?

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Elvira Nabiullina1:15:48

The criterion of truth is the fact. Annual inflation has halved over the past year — not by itself, but as a result of monetary policy, despite pro-inflationary risks materializing. Some forget the rate works with a three-to-six quarter lag; the inflation slowdown is due to the high rate maintained since 21%. Inflation started declining after the rate was raised — the logic that raising rates increases inflation doesn't hold. Regarding cleaned inflation: you can clean it any way you like, but if total inflation is 10%, credit rates won't be 2%. To get moderate rates, reduce total inflation. People's purchasing power depends on overall price growth. Analytically, any cleaned indicators are fine, but the focus must be on reducing total inflation and price pressure.

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Alexey Borisovich1:19:06

Monetary policy cannot influence root causes of supply-side inflation, but it can bring demand into alignment with circumstances, resulting in low inflation and moderate rates.

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Moderator1:19:31

Colleagues, please, Dmitry.

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Dmitry Maroko1:19:35

Dmitry Maroko, Russia 24. This week a court refused Euroclear's motion to suspend enforcement on the Central Bank's lawsuit. What does this mean in practice? Does it bring us closer to recovering frozen assets?

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Elvira Nabiullina1:19:51

We don't disclose details or tactics. We will take all measures and use all legal means to protect our legitimate rights.

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Moderator1:20:11

Colleagues, please. Yakov.

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Yakov Timakov1:20:16

Yakov Timakov, Expert magazine. Regarding comparisons of Governor Nabiullina to Paul Volcker: after the Volcker shock came Reaganomics with tax cuts and deregulation. Government is taking measures but supply restoration takes time. Fuel price increases could affect inflation expectations as they're sensitive goods. Agricultural product prices reversed after a spring decline. Also noting: housing utility tariff increases are postponed to October, so annual inflation may temporarily dip — just intra-year redistribution.

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Elvira Nabiullina1:21:33

[Prepared monetary policy statement] According to operational data, Q2 2026 economic activity is improving — temporary Q1 factors have exhausted. Construction is reviving after a cold winter. First-half dynamics show moderate output growth, though industries vary greatly due to structural restructuring. As government demand accelerates, room for private demand narrows. Consumer activity grows, supported by wage growth that has slowed. Labor market tension declines slowly; in some regions, staff shortage reduction has stalled. Wage growth must converge with productivity. Interest rates continue declining in most financial segments. Long-term OFZ yields rose slightly, reflecting budget policy uncertainty. Most corporate loans have floating rates, so rate cuts translate immediately into lower payments. Credit growth accelerated markedly in April–May; if sustained, current conditions may no longer be perceived as restrictive. Budget's money supply contribution remains elevated and will increase with revised parameters. Middle East situation raised commodity prices; for Russia, disinflationary effects still dominate through higher export revenue and ruble strengthening. Risk balance has shifted toward pro-inflationary. Budget rule revision risk is essentially materializing. If fiscal policy grows for priority tasks, monetary policy must play a stabilizer role. Current price growth has slowed but risks of future acceleration are rising. Neither further rate cuts nor cut size are predetermined. Pauses may be needed. Only a balanced approach under high uncertainty will achieve sustainable inflation stabilization at low levels. Thank you for your attention.

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Moderator1:30:16

Thank you, colleagues. Please, your questions — don't forget to introduce yourself and name your publication. Masha, please, first row.

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Maria Stepanova1:30:26

Good day, Maria Stepanova, Informagentstvo. What rate options were considered today? You said further steps aren't predetermined — has the probability increased of another 0.25% cut?

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Elvira Nabiullina1:30:43

Three rate options were specifically considered: hold at 14.5%, cut to 14.25%, and cut to 14%. All three appeared in economists' questions. Each had substantial arguments voiced by a significant number of participants. The decision reflects balanced consideration of all arguments, including error costs. Positions differed on three parameters: sustainability of recent stable inflation indicators; scale of additional pro-inflationary factors since the last meeting (revised budget plans and temporary fuel production reductions); and degree of monetary conditions tightness given credit growth acceleration. Virtually all participants noted room for further rate cuts has shrunk — the question of how much will be discussed at the next meeting.

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Moderator1:32:51

Thank you. Nastya.

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Anastasia Saveleva1:32:57

Anastasia Saveleva, Interfax. You said room for rate cuts has shrunk. How much did the budget factor contribute? Do you see risks of further reduction from the fuel market situation, with secondary effects on food prices and inflation expectations?

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Elvira Nabiullina1:33:31

We assess that room for rate cuts has narrowed. This will be discussed concretely at the next key meeting. Measuring specific factor contributions is difficult, but pro-inflationary factors have strengthened. For temporary supply-side factors, we need to watch whether one-off factors transition into sustained price pressure through inflation expectations. Gasoline is a marker commodity. June surveys don't yet show this; we'll look at July inflation expectation surveys before the next meeting. This was indeed one of the main factors in the balanced decision to reduce the rate cut pace.

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Moderator1:34:48

Colleagues, please. Pavel.

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Pavel1:34:55

In the press release, you noted a higher key rate trajectory may be needed. Does this apply to 2028?

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Elvira Nabiullina1:35:09

We'll present our new key rate trajectory vision at the next key meeting and assess what may be needed for 2026, 2027, and 2028. Most likely changes will primarily affect 2026 and 2027. We still need to review and recalculate. Yes, please, Alexey Borisovich.

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Alexey Borisovich1:35:33

Without prejudging the July meeting — all factors affect the forecast. If in 2028 fiscal policy remains outside the zero structural primary deficit, monetary policy will most likely not be fully neutral. We assess the neutral rate annually. Specific figures can't be given now, but there should be more clarity by the next meeting.

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Moderator1:36:41

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov1:36:46

Good day. Mitrofanov Nikita, Telegram channel Economic. My macro model predicted 70% probability of a 0.5% cut and 30% for 0.25%, based on inflation data even worse than the press release. The 30% was due to high inflation expectations, low unemployment, and the structural budget deficit factor. What influence does monetary policy have on money supply growth through the budget channel? It seems monetary policy primarily affects the private sector and less so the budget channel.

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Elvira Nabiullina1:38:14

Our decisions primarily affect market lending growth. Subsidized loans are insensitive to rate decisions. Our policy affects the budget through debt servicing and subsidized programs, but overall doesn't directly impact the budget channel. The Central Bank plays a compensating role in conditions of full resource utilization, adapting policy to prevent inflation through the private credit channel. Decisions operate with a three-to-six quarter lag, making fiscal policy predictability important. We act as a stabilizer.

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Moderator1:40:15

Next online question from Sergey Enkvist, NGS55, Omsk: Has the Central Bank revised its key rate forecast after the St. Petersburg forum stated it should become single-digit by year-end?

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Elvira Nabiullina1:40:36

No. We haven't revised the rate forecast — this happens at key meetings, the next in July. Our April forecast didn't assume cutting below 10% this year. Pro-inflationary risks have increased; any trajectory revision would more likely be upward. Room for cuts has shrunk. Not because aggregate demand needs more cooling, but because government demand will increase its contribution in 2026–2027, requiring more restrained private sector contribution to avoid simply accelerating inflation. We listen to experts but make independent decisions based on data analysis, including medium-term forecasts with policy lags.

demand, and GDP growth, so the private sector's contribution must be more restrained. Otherwise, there will be no additional GDP growth—instead, all this demand stimulation will simply translate into accelerating inflation. We must not allow this, because everyone would lose: both the population and businesses. Even those businesses currently urging a faster rate cut would face rising costs. And with accelerating inflation, market rates won't fall—they will rise. Therefore, our task is to prevent this situation. We certainly listen to and hear business experts, their arguments, including those voiced at the forum, and include them in the list of assessments that we and my colleagues discuss at the Board of Directors. But the decision is made on the basis of our own independent analysis of data. We analyze a large amount of data—not only statistical and not only current data, I want to emphasize again, but a medium-term forecast of how the situation will develop, taking into account the lags of monetary policy.

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Moderator1:43:23

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov1:43:29

Evgeny Grachov, Izvestia newspaper. Tell me, given that representatives of various agencies and businesses increasingly speak of the need for more active key rate cuts, does the Bank of Russia experience additional pressure on monetary policy matters? And have regulators, against the backdrop of these discussions, recently begun to take into account a broader range of economic indicators when making decisions, particularly those related to increased risks for business? Thank you.

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Elvira Nabiullina1:43:55

Well, I've already said that we certainly take into account the opinions of business experts. There are indeed many voices calling for a rate cut—they are entirely understandable. Not only from government agencies but from the business side as well. But we do not perceive this as pressure. I have said this many times, and the decision is made independently on the basis of our own analysis. We have always taken into account and continue to take into account a wide range of indicators—not only inflation and inflation expectations, but also the labor market, economic activity, and moreover, broken down by industry and region. We pay special attention to business surveys. I remind you that we regularly monitor 15,000 enterprises—you can familiarize yourself with the results, there's a lot of interesting information there. We also hold meetings with businesses. Again, we discuss a wide range of indicators. Sometimes one hears a somewhat simplified notion, for example regarding the labor market, that the Bank of Russia reduces everything to unemployment. This is absolutely not the case. In my speeches and my colleagues' speeches, we constantly emphasize that we look at a large amount of data characterizing the labor market situation: temporary employment, downtime, resumes, vacancies, wage growth rates, how it relates to productivity, in industry and regional breakdowns. So for each direction, this is a large list of data that we use. And your question is indeed correct, because when making a decision, one needs to use the full range of data characterizing the situation in the economy.

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Moderator1:45:52

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna1:45:57

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I cannot help but ask—your prolonged absence has generated numerous rumors about personnel changes, about your wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina1:46:14

I can only confirm that I indeed had a cold and temporarily lost my voice. And the only thing I can say is to thank those who sincerely worried about my health.

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Moderator1:46:29

Colleagues, please, Georgy.

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Georgy Nedogibchenko1:46:34

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of whether anyone is participating in discussions on tightening the parameters of the budget rule for 2027, with reducing the cutoff price to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina1:46:54

Well, our position here has not changed. First, we believe that the budget rule is a fundamental foundation of macroeconomic stability. The current base price is somewhat high from the perspective of a conservative assessment of long-term trends in the oil market. In our view, it should be reduced to ensure long-term budget stability of public finances and macroeconomic stability. And of course, the government will propose the cutoff level. But it should be said that a lower base price of the budget rule would certainly mean a stronger foundation for macroeconomic stability. Monetary policy will take this into account when we discuss our decision. Alexey Borisovich, we have a good understanding of the course of this discussion regarding the monetary policy decision, understanding what will happen with the budget rule in 2027. Thank you.

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Moderator1:48:09

Colleagues, please. Yulia.

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Yulia Rostorgoeva1:48:13

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, if one believes the statements of US authorities, is over. Oil is getting cheaper. What risks for the Russian budget, balance of payments, and the economy as a whole do you see in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina1:48:38

But when you talk about risks for the balance of payments from the end of the conflict, you probably mean that oil prices may start declining. But the fact is that these risks are neutralized or compensated by the actions of the budget rule we just discussed. Therefore, we don't see any significant risks from this point of view. Overall, if we talk about the total impact, it's probably still difficult to assess overall, because assessing the consequences of the conflict—even if it is finally concluded—for the world economy and world inflation is still premature. We see that in many countries it has already affected price growth and economic dynamics, which could also affect the Russian economy in terms of future demand for our goods. So far, the impact of this crisis has been disinflationary. Exporters' revenue increased, the exchange rate strengthened. But there are also pro-inflationary effects—this includes rising logistics costs for our businesses and rising import prices. So pro-inflationary risks also exist. But we said that the longer the conflict lasts, the greater the pro-inflationary risks. We now believe that pro-inflationary risks, if the conflict ends, are decreasing from this side compared to what we thought earlier.

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Moderator1:50:15

Thank you. The next question is online from Marina Ukhapova, Nizhny Novgorodskaya Pravda, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova1:50:24

Hello. The policy of lowering the key rate has been in place for a year. What effect has this had on the credit market? Perhaps more accessible loans for businesses, mortgage availability, some new credit offerings?

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Elvira Nabiullina1:50:41

Yes, the reduction of the key rate has led to credit growth. We can see this in market lending segments. For example, in the four months from January to April, nearly four times more market mortgages were issued than in the same period last year. And in the corporate lending segment, non-subsidized lending volumes have also grown. And as I already mentioned regarding business surveys, we regularly survey businesses and see that businesses have been less likely to cite a lack of financing for working capital as one of their main current difficulties. To be precise, the share of such enterprises has fallen to 10%—nearly 1.5 times less than before we began cutting rates. And we now see that last year's key rate increase—high interest rates of a year ago—were, yes, bitter but absolutely necessary medicine. A year ago, the key factor for businesses, according to the same surveys, was rising costs, essentially inflationary risks. Then practically every fourth company we surveyed complained about it. And the intensity of this issue—rising costs—has decreased. It hasn't disappeared, but it's decreased. Now one-fifth of companies mention it. This is a direct consequence of reduced inflation resulting from tight monetary policy.

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Moderator1:52:37

Colleagues, please, Zulfia, I see your hand.

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Zulfia Khamitova1:52:43

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary GDP estimate since the beginning of the year? And do you see risks of an economic overheating, and what key rate does Russia need for economic activity to grow at higher rates? Thank you.

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Elvira Nabiullina1:52:59

Well, by our estimates, overall in the first half of the year the economy continues to grow moderately, as I've already said. For the first quarter, you know Rosstat's estimate—GDP declined by 0.2%, but we said this was largely due to various seasonal and calendar factors. April already brought GDP back into positive territory. Overall, we estimate economic growth for January–April at 0.3%. By the end of the first half, we expect around half a percentage point. According to preliminary data, overall business activity across the country is also growing in May. I've already said we see an acceleration in consumer activity. We do not see risks of economic overheating. I remind you that the main markers of overheating we use—not only us, but most economists everywhere use them—are inflation falling well below target, rising unemployment, and a decline in real incomes. None of these markers are present. And what helps protect the economy from this situation is balanced monetary policy. As for your question about what rate level is needed for the economy to grow at a high pace—for the economy to grow sustainably at a high pace, it's not about the level of the rate. What's needed are mechanisms and institutions that stimulate the development of productive capacity and increase labor productivity. This is primarily determined by the efficiency of using production factors.

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Moderator1:54:58

Colleagues, please. Artem.

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Artem Gorun1:55:04

Good day. Artem, Investfutures. I have a question about the labor market, which we've already touched on. We currently see unemployment remaining near historical lows, but at the same time the picture is contradictory because large companies are increasingly using artificial intelligence. There seem to be some contradictions here. How do you assess these changes? Does this indicate that labor market tension is starting to ease—which you've been waiting so long for, citing it as one of the main factors? And how might this affect your overall assessment and possible rate decisions? Thank you.

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Elvira Nabiullina1:55:41

But indeed, there are certain signs of cooling in the labor market situation. However, I noted that we see the pace of decline in labor market tension is decreasing. And we see in surveys that over recent months, the share of enterprises experiencing a shortage of personnel hasn't declined in the past couple of months. And indeed, attention is often drawn to some workforce releases, to downtime at a number of enterprises. These cases certainly attract attention, but the scale of this within the country is still small and not growing. By our estimates, it's about 0.3% of all employed. So there are layoffs, but the fact that unemployment is not growing shows that if there were cuts at some companies, workers are finding jobs at other companies. As for artificial intelligence, we don't yet see a macroeconomic effect in terms of the labor market. It doesn't yet play a determining role. For individual companies that skillfully use artificial intelligence, it does increase labor productivity. And I think the impact of this factor will grow over years. But in the most general terms, I want to emphasize that the labor market is an important factor in rate decisions, but not the only one. We take into account the full range of factors affecting the economy and inflation.

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Moderator1:57:31

Marina, yes, please.

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Marina Pimionova1:57:35

Marina Pimionova, NTV, Delovye Novosti. Continuing the theme of business pressure and a bit about sports—right now the FIFA World Cup is underway. In football there's a concept called an own goal—a goal scored against your own team. Why can't the Central Bank convince businesses—and many financially literate people—that it's not scoring an own goal against the Russian economy? Thank you.

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Elvira Nabiullina1:57:59

Well, you know, we rather see ourselves as a goalkeeper defending against inflation. And probably many matches are decided by the reliability of goalkeepers. Someone has to protect those goals. Alexey Borisovich, anything to add?

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Alexey Borisovich1:58:27

I can only remind you of the Russia–Iran match in 2018.

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Elvira Nabiullina1:58:48

Colleagues, please, Nastya, second row.

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Anastasia Bashkatova1:58:52

Hello. Thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. Tell me, what indicator could the Central Bank now present as convincing evidence to the public of the effectiveness of its monetary policy? And the second part: given that achieving the 4% inflation target still presents difficulties, how does the Central Bank regard proposals from a number of experts to calculate and take into account in monetary policy not the usual general consumer inflation, but a different inflation—cleaned of factors that have significantly changed the economic situation since 2022, particularly the factor of the special military operation in all its manifestations, or the factor of stricter sanctions, and so on? Thank you.

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Elvira Nabiullina1:59:41

Thank you. Well, you are absolutely right about compelling indicators. The criterion of truth, as is known, is fact. So let's look at the facts, including regarding annual inflation. Annual inflation over the last year has halved. And this did not happen by itself—it's not a happy coincidence. The circumstances, as you see, were actually working in the opposite direction, with pro-inflationary risks materializing. And this is primarily the result of monetary policy. But why you're right is that this effect is sometimes doubted. Perhaps some people forget that the rate works with a lag. It seems to them that when there's a high rate and high inflation, we start cutting the rate and inflation comes down. But what we need to understand is that when we raised the rate, the effect operates over three to six quarters. And the fact that inflation has relatively slowed today is, of course, thanks to precisely that high rate we maintained for a prolonged period, starting from 21%. And if things were different, for example, we held the 21% rate for a sufficiently long time—I must admit—from October 2024 inflation started declining despite the high rate. So this logic that high rates lead to rising inflation doesn't withstand criticism. With the rate increase, inflation began declining already after its peak last March, in the spring. And seeing sustained disinflation, we are cutting the rate. Now the important question—indeed, many experts propose that we not focus on general inflation indicators but on stable inflation, cleaned of everything that's rising, and say: 'Here's what's left that isn't rising—then cut the rate, and monetary policy will be completely different.' One can clean inflation any way one likes. We actually show inflation indicators cleaned of the influence of utility tariff growth, tourism services, and so on. We have many such indicators. But interest rates won't become lower because of that. If overall inflation is 10%, let's say, and your cleaned inflation is 2%, credit rates won't be 2%—they'll be above 10% in any case. Therefore, if we want more moderate rates, we need to reduce overall inflation. And for people it doesn't matter by what component inflation is high. The purchasing power of their savings and incomes is determined by the overall price growth across the board. We can't say 'well, prices didn't rise on this, but they rose on everything else.' That's very important for people too. So, in our view, analytically one can look at any cleansings, but the focus should be on reducing overall inflation, reducing price pressure.

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Alexey Borisovich2:02:58

Yes, Alexey Borisovich?

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Elvira Nabiullina2:03:00

Well, and it's clear that monetary policy cannot influence the root causes of inflation that are related to supply-side changes. But what it can do is bring demand into alignment with these circumstances, and then inflation will be low and rates will be moderate.

M

Moderator2:03:24

Colleagues, please, Dmitry.

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Dmitry Maroko2:03:28

Dmitry Maroko, Russia 24. This week, a court rejected Uralkali's petition to suspend enforcement proceedings in the Central Bank's lawsuit. What does this mean in practice? Does this bring us closer to recovering frozen assets? Thank you.

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Elvira Nabiullina2:03:44

Well, here I can probably only repeat the general formula, because we do not disclose details. Once again I confirm—we do not disclose details, we do not disclose tactics. We will take all measures and use all legal means to protect our lawful rights.

M

Moderator2:04:05

Colleagues, please. Yakov.

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Yakov Timakov2:04:09

Good day. Yakov Timakov, Expert magazine. A question for Elvira Nabiullina and Alexey Borisovich. Key rate decisions have recently been compared to the Volcker shock. The head of the Federal Reserve in the 1970s–80s, Paul Volcker, was, as is known, a proponent of tight monetary policy, the result of which was stable and low inflation on one hand and recession on the other. I intentionally don't draw direct parallels, since the Central Bank's arguments about a sectoral slowdown sound convincing, and not everyone agrees with the thesis of a recession in the Russian economy. My question is not about the current situation but about long-term consequences. After the Volcker shock, the US was followed by no less famous Reaganomics, which was expressed in tax cuts, deregulation, and the strengthening of economic institutions. What kind of 'post-Nabiullina era' awaits the Russian economy? What economic reforms or structural changes could compensate for the costs of tight monetary policy? Thank you.

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Elvira Nabiullina2:05:01

Well, first of all, I wouldn't draw such direct parallels. But your question about long-term consequences is very important, and I'd like to give an extended answer here. Let me start by saying that tight monetary policy is not an end in itself—it's a tool to create conditions for sustainable growth. The costs of tight monetary policy are real, but the costs of not fighting inflation are much greater. Let me now turn to the main theme of our monetary policy decision.

Before that, I'd like to report on the key parameters of inflation and economic activity. Inflation. In May, annual inflation was 9.2%. This is lower than in April, when it was 9.8%. So monthly inflation has also decreased. In May, monthly inflation was 0.4%, compared to 0.6% in April. I want to remind you that our target is 4%. The slowdown in inflation we're seeing is the result of tight monetary policy implemented previously. However, we note that inflation remains elevated, and its trajectory in the coming months will be significantly influenced by a number of new factors. First, the situation with fuel prices. The government is taking necessary measures, but restoring supply may take time. Fuel price increases could also affect inflation expectations, since this is a sensitive product for both people and businesses. Moreover, in recent weeks, there has been a reversal in the price dynamics for fruits and vegetables after an unusually sharp decline in the spring. We already see this in preliminary data. And concluding the inflation topic, I'd like to draw attention to a statistical effect that will affect annual inflation indicators in the coming months. In July, there will be no increase in utility tariffs as last year—their indexation has been moved to October. This means annual inflation may temporarily decline slightly due to this factor, but this will only be a redistribution of price growth within the year.

Second—the economy. According to preliminary data, in the second quarter of 2026, as we expected, economic activity indicators are improving. Temporary factors that restrained it at the beginning of the year, including calendar and weather factors, have been exhausted or reversed. In particular, there is some revival in construction after a cold and snowy winter—it was the main source of the GDP decline in the first quarter. If we analyze the overall economic dynamics for the first half, it corresponds to moderate growth in output of goods and services. At the same time, the situation varies greatly by sector, and this heterogeneity has grown over the past year. In large part, this is related to the structural restructuring of the economy. If government demand growth accelerates significantly, the space for expanding private demand—both investment and consumer—under limited resources becomes smaller. A certain contribution to increased sectoral heterogeneity is also made by shorter-term factors such as the situation in world commodity markets and the temporary shutdown of certain manufacturing capacities. As for consumer activity, its moderate growth continues. In spring months, car purchases picked up. Demand remains high in the services segment. Wage growth supports consumption, although it has somewhat slowed, and enterprises are planning increasingly moderate indexations going forward. In addition, there is a fairly high dispersion in wage dynamics across industries and types of activity—it reflects the heterogeneity in the economy I mentioned. Overall, labor market tension is declining slowly. According to information from our territorial institutions, in a number of regions, the reduction in the personnel shortage has stalled in recent months. Under these conditions, for sustainable reduction of cost and price pressure, further convergence of wage growth and productivity is necessary. And I want to emphasize that to increase productivity, what's needed above all is for labor resources to be maximally employed where they yield the greatest return for the economy.

Third—monetary conditions. Interest rates in most financial market segments continued to decline smoothly under the influence of previous monetary policy decisions. At the same time, longer-term OFZ yields increased somewhat. This reflects the growth of the term premium linked to uncertainty regarding fiscal policy. I want to note that most loans to companies, especially large and medium-sized ones, are now issued at floating rates. And for such loans, a reduction in the key rate translates into a reduction in interest payments immediately and in full—not only for new loans but also for existing ones. The savings rate, although slightly declining, remains fairly high. Ruble deposits of the population in banks continue to grow. Among banking products, savings accounts are gaining popularity. Citizens' interest in financial market instruments and non-financial instruments continues to rise. In April–May, credit growth noticeably accelerated. In retail, there was an activation of unsecured and auto lending, as well as market-rate mortgages. Corporate lending growth rates have significantly increased. The dynamics of monetary indicators currently require special attention from us. First, if the acceleration of lending proves to be a sustained trend rather than a short-term spike after low values at the beginning of the year, this may indicate that current monetary conditions are no longer perceived by borrowers as restrictive. Second, the fiscal policy's contribution to monetary supply growth remains elevated, and with the revision of budget parameters, it will be larger than we previously assumed. If credit growth continues at such high rates under these conditions, it may require a tighter policy than expected in the baseline scenario.

The combined effect from the fiscal and credit channels has already led to monetary base growth running at the upper bound of our expectations and even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightness than was built into our April forecast.

Now about external conditions. The situation in the Middle East led to a rise in commodity prices. These changes have already begun to translate into accelerating inflation in many countries. A number of central banks responded to increased pro-inflationary risks by raising rates. Global economic growth expectations are meanwhile declining. For the Russian economy, disinflationary effects have so far predominated. Higher commodity prices led to increased export revenue and ruble strengthening. Import demand also grew, but not as substantially as the value of exports. Risks of a protracted Middle East conflict have declined, but uncertainty remains regarding the scale of its pro-inflationary consequences for the world economy. These could affect the Russian economy through prices of imported goods and logistics costs.

I'll move on to risks overall. By our estimates, their balance has shifted more strongly toward pro-inflationary. Regarding the risk of revising fiscal policy parameters, it can be said that it has essentially already materialized, but uncertainty regarding its scale remains. Fiscal and monetary policy simultaneously affect economic demand. If the fiscal policy's contribution grows to achieve priority objectives, then monetary policy must play the role of stabilizer, and its tightness must change accordingly to somewhat reduce the credit contribution to aggregate demand. Only in this way can we avoid demand overshooting relative to the capacity to expand supply and a new round of inflation. Risks from labor shortages and inflation expectations remain. Pro-inflationary risks have increased related to the temporary reduction in supply in certain sectors. And I've already spoken about risks from external conditions. The disinflationary risk remains lower domestic demand dynamics compared to our baseline estimates. And in conclusion, about our future decisions. Current price growth rates have notably declined, but we are noting the growth of risks that could lead to accelerating inflation in the future. Especially important for us are those that could sustainably influence demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags, so our decisions must be forward-looking. And I want to emphasize that neither the further reduction of the key rate nor the size of the step at each specific meeting is predetermined. We may need pauses to assess all incoming information and the effect of our previous decisions. Only maintaining a balanced approach, especially under conditions of high uncertainty, will allow achieving a sustainable result and stabilizing inflation at a low level. Thank you for your attention.

M

Moderator2:14:09

Thank you, colleagues. Please, your questions—and don't forget to introduce yourself and name your publication. Masha, please, first row.

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Maria Stepanova2:14:19

Good day. Informagentstvo, Maria Stepanova. What options were considered today? You've already said that further steps are not predetermined, but has the probability increased that you'll use a 0.25% cut again? Thank you.

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Elvira Nabiullina2:14:36

Thank you. A traditional question for us. This time, three rate options were considered in detail: keep at 14.5%, and cut to 14.25% and 14.00%. By the way, all these options figured in economists' questions. Each had weighty arguments, and I must say, a solid number of discussion participants spoke in favor of each. And in my view, the final decision is indeed a balanced consideration of all arguments, including from the standpoint of the cost of error. And if I were to summarize, the positions of discussion participants differed along three main parameters. First is the assessment of the sustainability of the underlying inflation indicators observed in recent months. We need to understand how truly sustainable they are. Second is the assessment of the scale of additional pro-inflationary factors that arose since the last Board of Directors meeting. On the demand side, this is the shift in fiscal plans for 2026 and subsequent years. And on the supply constraint side, including the temporary reduction in fuel production. The third parameter is the assessment of how tight monetary conditions are. This is important given the significant acceleration in lending growth over the past two to three months. And practically all participants noted that the space for further rate cuts has narrowed. But to what extent it has narrowed—that was, and apparently will be, the subject of discussion at the next meeting.

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Moderator2:16:44

Thank you. Nastya.

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Anastasia Saveleva2:16:50

Anastasia Saveleva, Interfax. You've already said that space for further rate cuts has narrowed. Could you say how much this was influenced specifically by the fiscal factor? And do you see risks that this space will shrink further due to the situation on the fuel market, which could have, for example, secondary effects—price increases for other groups of goods, such as food—and could lead to a rise in inflation expectations?

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Elvira Nabiullina2:17:24

We generally assess the reduction of this space for key rate cuts. The specifics will be discussed at the next meeting, which is an anchor meeting. But the factors affecting this, the specific value of these factors—it's difficult to measure, but we note that pro-inflationary factors have strengthened their impact. As for temporary supply-side factors, it's very important how the situation develops and whether these factors, from being one-off, could transition into sustained price pressure, primarily through rising inflation expectations. Obviously, gasoline is a benchmark product. And in the June surveys, there isn't yet this effect. We'll look at the July inflation expectations surveys, which will be released before the next meeting. It will be important to see how this is reflected in costs across a broad range of goods. So these are the factors that need to be assessed. I'll say again that this was indeed one of the main factors in making the balanced decision and reducing the rate cut step.

M

Moderator2:18:41

Colleagues, please. Pavel.

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Pavel2:18:48

Pavel, versii.ru data. I'd like to ask: in the press release you noted that a higher key rate trajectory may be needed. Does this relate to 2028? Thank you.

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Elvira Nabiullina2:19:03

We will present our updated view of the key rate trajectory at the anchor meeting, as I already said, and we will assess the dynamics that may be needed for 2026, 2027, and 2028. But most likely, the changes will primarily affect 2026 and 2027. But this still needs to be reviewed and recalculated.

A

Alexey Borisovich2:19:25

Yes. Without prejudging the July meeting, because obviously the entire forecast is influenced by all factors, not only those that have changed to date. But we must proceed from the premise that if in 2028 fiscal policy continues not to be in a mode of zero structural primary deficit, this would mean that monetary policy in 2028 would most likely not be fully neutral, because it would need to compensate for that. Again, all else being equal, including what impact this change in fiscal policy will have. We will assess the level of the neutral rate. We do this annually before presenting the main directions of monetary policy. So indeed, specific figures cannot be stated now, but by the next meeting, I think there will be more clarity on this.

M

Moderator2:20:34

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov2:20:39

Good day. Mitrofanov Nikita, Telegram channel Economica. I continue to develop my macroeconomic model that tries to predict your decision. Today, the model predicted a 70% probability of a 0.5% rate cut and a 30% probability of a 0.25% cut. Mostly, this model decision—rather than yours—was based on calculated inflation data. And my calculated data were actually worse than your press release. So reality turned out better. It seems for my model, a 0.5% cut would have been more probable. But notwithstanding my surprise, I'd like to clarify the following. The 30% probability was because we still have quite high inflation expectations among the population. Unemployment is quite low. And a new factor appeared that became very prominently highlighted—the structural deficit of the Russian federal budget. In this context, I'd like to ask: what influence does monetary policy and its tightness have on the growth of the money supply through the fiscal channel, since this is a factor that influences things, but at the moment it seems monetary policy and rate decisions primarily affect the private sector and to a lesser degree the fiscal channel. Thank you.

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Elvira Nabiullina2:22:07

Well, naturally, our decisions primarily influence the pace of lending growth and market lending above all. That's why we always say that the share of subsidized loans is important for us, because subsidized loans as a whole are insensitive to our rate decision. So primarily we influence private credit. Our monetary policy certainly does have an impact on the budget, because the budget has internal debt, the cost of servicing debt. Plus the subsidized programs I mentioned, where the budget has taken on a significant part of the interest rate risk. But overall, monetary policy does not exert a direct influence on the fiscal channel. Rather, it's the opposite—there are budget decisions that the government prepares and the Duma adopts to fulfill priority tasks. And in this situation, when we have full employment of resources, the Central Bank plays a compensating role. That is, we must, taking as given how much money flows through the fiscal channel, adapt our monetary policy so that through the private credit channel, the amount of money flowing into the economy is such that inflation doesn't accelerate. And the difficulty also lies in the fact that our decisions operate with a lag. I've talked about this lag. Today's decisions will be reflected over three to six quarters. That's why we say that earlier predictability of fiscal policy is important for us. So there is an interconnection, but we act here more as a stabilizer.

M

Moderator2:24:08

Thank you. The next question is online from Sergei Enkvest, publication NGS55, city of Omsk. Has the Central Bank revised its key rate forecast after statements at the St. Petersburg International Economic Forum that by the end of the year it should become single-digit?

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Elvira Nabiullina2:24:29

No. First, I'll remind you that we haven't revised the key rate forecast. We revise it at anchor monetary policy meetings. The next one will be in July, when we generally revise the forecast, because the rate forecast depends on how we revise the overall forecast and how our view of future developments changes. As for a single-digit rate, our April forecast did not assume reducing the key rate to single-digit levels—below 10%—this year. I said that pro-inflationary risks have actually increased, and if the key rate trajectory forecast is revised, it would more likely be upward, not downward. And the space for reducing the key rate by the end of this year and perhaps next year—the question about 2028 was also raised—it has most likely decreased. And not because we think additional cooling of aggregate demand is needed, but because—and I emphasize—aggregate demand. We don't think aggregate demand needs to cool further. But because state demand will make a larger contribution in 2026 and 2027 to both demand and GDP growth, the private sector's contribution must be more restrained. Otherwise, there will be no additional GDP growth—instead, all this demand stimulation will simply translate into accelerating inflation. We must not allow this, because everyone would lose: both the population and businesses. Even those businesses currently urging a faster rate cut would face rising costs. And with accelerating inflation, market rates won't fall—they will rise. Therefore, our task is to prevent this situation. We certainly listen to and hear business experts, their arguments, including those voiced at the forum, and include them in the list of assessments that we discuss at the Board of Directors. But the decision is made on the basis of our own independent analysis of data. We analyze a large amount of data—not only statistical and not only current data, I want to emphasize again, but a medium-term forecast of how the situation will develop, taking into account the lags of monetary policy.

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Moderator2:27:17

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov2:27:23

Evgeny Grachov, Izvestia newspaper. Tell me, given that representatives of various agencies and businesses increasingly speak of the need for more active key rate cuts, does the Bank of Russia experience additional pressure on monetary policy matters? And have regulators, against the backdrop of these discussions, recently begun to take into account a broader range of economic indicators when making decisions, particularly those related to increased risks for business? Thank you.

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Elvira Nabiullina2:27:48

Well, I've already said that we certainly take into account the opinions of business experts, and there are indeed many voices calling for a rate cut. They are entirely understandable. But we do not perceive this as pressure. I have said this many times, and the decision is made independently on the basis of our own analysis. We have always taken into account and continue to take into account a wide range of indicators—not only inflation and inflation expectations, but also the labor market, economic activity, and moreover, broken down by industry and region. We pay special attention to business surveys. Our regular monitoring of 15,000 enterprises—its results can be reviewed, there's a lot of interesting information. We also hold meetings with businesses. Again, we discuss a wide range of indicators. Sometimes one hears a somewhat simplified notion regarding the labor market, that the Bank of Russia reduces everything to unemployment. This is absolutely not the case. We constantly emphasize that we look at a large amount of data characterizing the labor market situation and all related indicators. So for each direction, this is a large list of data that we use. And your question is indeed correct, because when making a decision, one needs to use the full range of data characterizing the situation in the economy.

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Moderator2:29:45

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna2:29:50

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I cannot help but ask—your prolonged absence has generated numerous rumors about personnel changes, about your wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina2:30:07

I can only confirm that I indeed had a cold and temporarily lost my voice. And the only thing I can say is to thank those who sincerely worried about my health.

M

Moderator2:30:22

Colleagues, please, Georgy.

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Georgy Nedogibchenko2:30:27

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of whether anyone is participating in discussions on tightening the parameters of the budget rule for 2027, with reducing the cutoff price to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina2:30:47

Well, our position here has not changed. First, we believe that the budget rule is a fundamental foundation of macroeconomic stability. The current base price is somewhat high from the perspective of a conservative assessment of long-term trends in the oil market. In our view, it should be reduced to ensure long-term budget stability of public finances and macroeconomic stability. And of course, the government will propose the cutoff level. But it should be said that a lower base price of the budget rule would certainly mean a stronger foundation for macroeconomic stability. Monetary policy will take this into account when we discuss our decision. Alexey Borisovich, we have a good understanding of the course of this discussion regarding the monetary policy decision, understanding what will happen with the budget rule in 2027. Thank you.

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Moderator2:32:02

Colleagues, please. Yulia.

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Yulia Rostorgoeva2:32:06

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, if one believes the statements of US authorities, is over. Oil is getting cheaper. What risks for the Russian budget, balance of payments, and the economy as a whole do you see in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina2:32:29

But when you talk about risks for the balance of payments from the end of the conflict, you probably mean that oil prices may start declining. But the fact is that these risks are neutralized or compensated by the actions of the budget rule we just discussed. Therefore, we don't see any significant risks from this point of view. Overall, if we talk about the total impact, it's probably still difficult to assess, because assessing the consequences of the conflict—for the world economy and world inflation—is still premature. We see that in many countries it has already affected price growth and economic dynamics, which could also affect the Russian economy in terms of future demand for our goods. So far, the impact of this crisis has been disinflationary. Exporters' revenue increased, the exchange rate strengthened. But there are also pro-inflationary effects—this includes rising logistics costs for our businesses and rising import prices. So pro-inflationary risks also exist. But we said that the longer the conflict lasts, the greater the pro-inflationary risks. We now believe that pro-inflationary risks, if the conflict ends, are decreasing from this side compared to what we thought earlier.

To assess the consequences of the conflict, even if it is finally resolved, on the global economy and global inflation is still premature. We see that in many countries it has already affected price growth and economic dynamics, and this may also affect the Russian economy in terms of future demand for our goods. So far, the impact of this crisis has been disinflationary because exporters' revenue has grown, and the exchange rate has strengthened. But there are also pro-inflationary effects, certainly — increased logistics costs for our businesses and rising import prices. So pro-inflationary risks do exist. But we said that the longer the conflict lasts, the greater the pro-inflationary risks. We now believe that if the conflict ends, these risks decrease from this side compared to what we previously thought.

M

Moderator2:42:03

The next question online is from Yulia Rostorgoeva, Market Power.

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Yulia Rostorgoeva2:42:26

Good afternoon. Yulia Rostorgoeva, Market Power. The Iran conflict, according to US authorities' statements, is over. Oil is becoming cheaper. What risks for the Russian budget, balance of payments, and the economy as a whole do you see in this scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina2:42:33

Well, when you say risks to the balance of payments from the end of the conflict, you probably mean that oil prices may start to decline. But the thing is, these risks are neutralized or compensated by the actions of the budget rule, which we discussed. So we don't see any significant risks from this point of view. Overall, speaking of the aggregate impact, it's probably still difficult to assess, because evaluating the consequences of the conflict — even if it is finally resolved — on the global economy and global inflation is still premature.

Now, regarding external conditions. The situation in the Middle East has led to a rise in commodity prices. These changes have already begun to translate into accelerating inflation in many countries. A number of central banks have responded to rising pro-inflationary risks by raising rates. Expectations for global economic growth are being revised downward. For the Russian economy, disinflationary effects have so far prevailed. Higher commodity prices have led to increased export revenue and a stronger ruble. Import demand has also grown, but not as significantly as export volumes. Risks of the Middle East conflict escalating have decreased, but uncertainty remains regarding the scale of its pro-inflationary consequences for the global economy. They could affect the Russian economy through prices of imported goods and logistics costs.

Turning to risks overall. In our assessment, their balance has shifted more toward pro-inflationary. Regarding the risk of budget policy parameter revision, it has essentially already materialized, but uncertainty remains about its scale. Fiscal and monetary policy simultaneously affect economic demand. If the contribution of fiscal policy grows in order to implement priority tasks, then monetary policy must play the role of a stabilizer, and its tightness must change accordingly to reduce the contribution of credit to aggregate demand. Only in this case can we avoid aggregate demand overshooting the supply expansion capacity and a new round of inflation.

Risks from labor shortages and inflation expectations persist. Pro-inflationary risks related to temporary supply disruptions in certain sectors have increased. And regarding risks from external conditions, I have already spoken. The disinflationary risk remains weaker domestic demand dynamics compared to our baseline estimates.

To conclude, regarding our future decisions. Current price growth rates have declined noticeably, but we are noting rising risks that could lead to accelerating inflation in the future. Especially important for us are those that may sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags. Therefore, our decisions must be forward-looking. I want to emphasize that neither further key rate cuts nor the size of the step at each specific meeting are predetermined. We may need pauses to assess all incoming information and the effects of our previous decisions. Only maintaining a balanced approach, especially under high uncertainty, will allow us to achieve a sustainable result and stabilize inflation at a low level. Thank you.

M

Moderator2:57:12

Thank you, colleagues. Please, your questions, and don't forget to introduce yourself and name your publication.

D

Dmitry Maroko2:57:31

Dmitry Maroko, Rossiya 24. This week the court rejected Uralkali's motion to suspend enforcement proceedings in the lawsuit filed by the Central Bank. What does this mean in practice? Does this bring us closer to recovering the frozen assets? Thank you.

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Elvira Nabiullina2:57:47

Well, here I can probably only repeat the general formula, because we do not disclose details. Once again I confirm that we do not disclose details, do not disclose tactics, and that we will take all measures and use all legal means to protect our legitimate rights.

M

Moderator2:58:08

Colleagues, please. Yakov.

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Yakov Timakov2:58:13

Good day. Yakov Timakov, Expert magazine. A question for Elvira Nabiullina and Alexey Borisovich. Recently, the Zabotkin shock was put in one row with the Volcker shock. The head of the Fed in the seventies and eighties, Paul Volcker, was a proponent of tight monetary policy, the result of which was stable low inflation on one hand and recession on the other. I'm intentionally not drawing direct parallels now, since the Central Bank's arguments about sectoral decline sound convincing, and not everyone agrees with the thesis about recession in the Russian economy. My question is not about the current situation but about long-term consequences. After the Volcker shock in the US came the equally famous Reaganomics, which involved tax cuts, deregulation, and strengthening the fuel...

M

Maria Stepanova2:58:22

Good day, information agency. Maria Stepanova. What options were considered today? You already said that further steps are not predetermined, but has the probability increased that you will again use 0.25? Thank you.

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Elvira Nabiullina2:58:40

Thank you. The question is a traditional one for us, yes? This time, three rate options were considered very specifically: 14%, to leave it at 14.25%, and to lower it to exactly 14%. By the way, all these options appeared in economists' questions. There were weighty arguments for each option, and I must say a significant number of discussion participants spoke for each. In my view, the final decision is indeed a balanced consideration of all arguments, including from the perspective of type I and type II errors.

If I were to generalize, I could say that participants' positions differed along three main parameters. First is the assessment of how sustainable the stable inflation indicators observed over the past few months are. We have a stable inflation indicator, and we need to understand how truly sustainable it is, the degree of that sustainability. Second is the assessment of the scale of additional pro-inflationary factors that emerged since the last Board of Directors meeting — on the demand side, the shift in budget plans for 2026 and subsequent years, and on the supply side, the temporary reduction in fuel production. The third parameter is the assessment of how tight current monetary conditions are. This is important given the significant acceleration of credit growth in the last two to three months.

Practically, all participants noted that the space for further rate cuts has narrowed. But by how much it has narrowed — that was and apparently will be the subject of discussion at the next meeting.

A

Anastasia Saveleva3:00:48

Anastasia Saveleva, Interfax. You've already said that space for further rate cuts has narrowed. Could you say how much the budget factor influenced this? And do you see risks that this space could shrink further due to the situation on the fuel market, which could have secondary effects — rising prices for other goods, for example food — and could lead to rising inflation expectations?

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Elvira Nabiullina3:01:28

We generally assess the reduction in space for further key rate cuts. This will be discussed specifically at the next meeting, which is the key meeting. The factors influencing this and the specific magnitude of these factors are hard to measure, but we note that pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it is very important how the situation develops and whether these factors — from one-time events — could transition into sustained price pressure, primarily through rising inflation expectations. Gasoline is a marker product. In the June surveys, this is not yet reflected. We will look at the July inflation expectations surveys, which will come out before the next meeting.

It will be important to see how this affects costs across a wide range of goods. So these are the factors that need to be assessed. I'll say again that this was indeed one of the main factors in making the balanced decision to reduce the rate cut step.

M

Moderator3:02:45

Colleagues, please. Pavel.

P

Pavel3:02:49

Thank you. Regarding the forecast data, I'd like to ask: in the press release you noted that a higher key rate trajectory may be required. Does this relate to 2028? Thank you.

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Elvira Nabiullina3:03:06

We will provide our new outlook for the key rate trajectory, as I already said, at the key meeting, and we will assess what dynamics may be needed for 2026, 2027, and 2028. But most likely, changes will primarily affect 2026-2027. But we still need to review and recalculate. Yes, please, Alexey Borisovich.

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Alexey Borisovich3:03:30

Yes. Without preempting the July meeting, because obviously the entire forecast is influenced by all factors, not just those that have changed to date. But we must proceed from the assumption that if in 2028 fiscal policy is still not in a zero structural primary deficit mode, this would mean that monetary policy most likely in 2028 will also not be fully neutral, because it will need to compensate for that. Again, all else being equal.

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Elvira Nabiullina3:04:08

All else being equal, including how this change in fiscal policy will affect — we will make an assessment of the neutral rate level. We do this annually before the main guidelines for monetary policy. So we really cannot give specific numbers right now. But by the next meeting, I think there will be more clarity on this.

M

Moderator3:04:37

Thank you, colleagues. Please, Nikita.

N

Nikita Mitrofanov3:04:42

Good day. Nikita Mitrofanov, Telegram channel Economic. I continue to develop my macroeconomic model that tries to predict your decision. Today the model predicted with 70% probability that you would cut the key rate by 0.5%, and with 30% probability by 0.25%. Mainly this model decision — not yours — was based on calculated inflation data. And my calculated data were even worse than in your press release. So reality turned out better. As if for my model, it seemed more likely to cut by 0.5%. But nevertheless, my surprise — I'd like to clarify the following. The 30% probability was because inflation expectations of the population are still quite high. Unemployment is quite low. And a new factor appeared, which was highlighted very brightly — the structural deficit of the Russian Federation budget. In this context, I'd like to ask you: what influence does monetary policy and its tightness have on money supply growth via the budget channel? Because this is a factor that influences things, but at the moment it's beginning to seem that monetary policy and the rate decision primarily affect the private sector and to a lesser extent the budget channel. Thank you.

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Elvira Nabiullina3:06:10

Well, naturally, we primarily influence with our decisions the pace of credit growth and market credit growth above all. That's why we always say that for us the share of subsidized loans is important, because subsidized loans as a whole are insensitive to our rate decision. Obviously, we primarily influence private credit. Our monetary policy does of course also affect the budget, because the budget has internal debt, the cost of servicing that debt, plus the subsidized programs I mentioned, where the budget has taken on a significant portion of the interest rate risk. But overall, the monetary policy channel does not have a direct impact on the budget. Rather, it's the other way around — there is a budget decision being prepared by the government, adopted by the Duma, to fulfill priority tasks.

And in situations where we have full employment of resources, the Central Bank plays a compensating role. That is, we must, taking as given how much money flows through the budget channel, adapt our monetary policy so that through the private credit channel an amount of money flows into the economy that doesn't accelerate inflation. And the difficulty also lies in the fact that our decisions operate with a lag. I spoke about this lag. Today's decisions will be reflected over three to six quarters. That's why we say that earlier predictability of fiscal policy is important for us. So there is an interconnection, but it is rather such that we act here as a stabilizer.

M

Moderator3:08:11

Thank you. The next question online is from Sergey Enquist, publication NGS55, city of Omsk. Has the Central Bank revised its key rate forecast after the statement at the St. Petersburg International Economic Forum that by the end of the year it should be a single-digit figure?

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Elvira Nabiullina3:08:32

No.

First, let me remind you that we are not currently revising the key rate forecast. We revise it at key meetings. The next one will be in July, when we generally revise the forecast, because the rate forecast depends on how we revise the overall forecast, how our view of future developments changes. Regarding a single-digit rate level — our April forecast did not imply cutting the key rate to single-digit levels, that is below 10%, this year. I said that pro-inflationary risks have even increased, and if the rate trajectory forecast is revised, it would more likely be upward, not downward. And the space for cutting the key rate by the end of this year and perhaps into next year — the question about 2028 was also raised — has most likely shrunk. And not because we think additional cooling of aggregate demand is needed, but because government demand will contribute more in 2026 and 2027 to both demand and GDP growth, which means the private sector's contribution should be more restrained, otherwise no additional GDP growth will occur and all this demand stimulus will just go into accelerating inflation.

We must not allow this, because everyone loses from it — both the population and businesses. Even those currently requesting accelerated rate cuts — for them it would mean rising costs. And with accelerating inflation, market rates will not fall; they will rise. So our task is to prevent this situation. Of course, we listen to and hear business experts, their arguments, including those voiced at the forum, and include them in the range of considerations that we discuss with colleagues at the Board of Directors. But we make decisions based on our own independent analysis. We analyze a large amount of data — not only statistical and not only current data — I'll emphasize again, but also the medium-term forecast of how the situation will develop given monetary policy lags.

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Moderator3:11:20

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov3:11:26

Evgeny Grachov, Izvestia newspaper. Tell me, in a situation where representatives of various agencies and businesses increasingly speak of the need for more active key rate cuts, does the Bank of Russia experience additional pressure on monetary policy matters? And have regulators, against the backdrop of these discussions, recently begun to consider a broader spectrum of economic indicators when making decisions, in particular related to increased risks for businesses? Thank you.

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Elvira Nabiullina3:11:51

Well, I've already said that we certainly take into account the opinions of experts and businesses, and yes, there are many voices in favor of rate cuts. They are quite understandable. Indeed, not only from the side of agencies, but from the business side. But we do not perceive this as pressure. I've said this repeatedly, and we make decisions independently based on our own analysis. We have always considered and continue to consider a broad spectrum of indicators — not only inflation, not only inflation expectations, but also the labor market, economic activity, and moreover in sectoral and regional breakdowns. We pay particular attention to business surveys. I remind you, our regular monitoring of 15,000 enterprises — you can familiarize yourself with its results. There is a lot of interesting information there, of course, and we conduct meetings with businesses. Again, a broad range of indicators — we've already discussed them. Sometimes one hears some oversimplified notions, for example about the labor market, that the Bank of Russia reduces everything to unemployment. This is absolutely not the case. In my speeches and my colleagues' speeches, we constantly emphasize that we look at a large amount of data characterizing the labor market situation — temporary employment, downtime, resumes, vacancies, wage growth rates relative to productivity, sectoral and regional breakdown. So for each direction it's a large list of data that we use.

And your question is indeed correct, because when making decisions, one needs to use the entire set of data characterizing the economic situation.

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Moderator3:13:48

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna3:13:53

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I can't help but ask — your prolonged absence gave rise to many rumors about personnel changes, about you wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina3:14:10

I can only confirm that I indeed had a cold and for some time lost my voice. And the only thing I can say is to thank those who sincerely worried about my health.

M

Moderator3:14:26

Colleagues, please, Georgy.

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Georgy Nedogibchenko3:14:30

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware, does it participate in discussions on toughening the parameters of the budget rule for 2027, with a reduction of the cutoff price to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina3:14:50

Well, our position here has not changed. First, we believe that the budget rule is a fundamental basis for macroeconomic stability. The current base price is somewhat high from the perspective of a conservative assessment of long-term trends in the oil market. In our view, it should be lowered to ensure long-term fiscal stability of public finances and macroeconomic stability. Of course, the government will propose the specific cutoff level. But I must say that with a lower base price for the budget rule, the monetary policy will certainly be — this will mean a stronger basis for macroeconomic stability. Monetary policy will take this into account when we discuss our decisions. Alexey Borisovich, we have a good understanding of the course of this discussion from the perspective of making monetary policy decisions now, understanding what will happen with the budget rule in 2027. Thank you.

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Moderator3:16:05

Colleagues, please. Yulia.

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Yulia Rostorgoeva3:16:10

Good day. Yulia Rostorgoeva, Market Power. The Iran conflict, according to US authorities' statements, is over. Oil is becoming cheaper. What risks for the Russian budget, balance of payments, and the economy as a whole do you see in this scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina3:16:33

Well, when you say risks to the balance of payments from the end of the conflict, you probably mean that oil prices may start to decline. But the thing is, these risks are neutralized or compensated by the actions of the budget rule, which we discussed. So we don't see any significant risks from this point of view. Overall, speaking of the aggregate impact, it's probably still difficult to assess, because evaluating the consequences of the conflict — even if it is finally resolved — on the global economy and global inflation is still premature. We see that in many countries it has already affected price growth and economic dynamics, and this may also affect the Russian economy in terms of future demand for our goods. So far, the impact of this crisis has been disinflationary because exporters' revenue has grown, and the exchange rate has strengthened. But there are also pro-inflationary effects, certainly — increased logistics costs for our businesses and rising import prices. So pro-inflationary risks do exist. But we said that the longer the conflict lasts, the greater the pro-inflationary risks. We now believe that if the conflict ends, these risks decrease from this side compared to what we previously thought.

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Moderator3:18:11

Thank you. The next question online is from Marina Ukhapova, Nizhegorodskaya Pravda newspaper, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova3:18:20

Hello. The policy of cutting the key rate has been in place for a year. What effect has this had on the credit market? Perhaps more accessible loans for businesses, mortgage availability, some new credit offerings?

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Elvira Nabiullina3:18:37

Yes, the key rate cut has led to credit growth. And we see this in the market segments of lending. For example, over four months — January through April — almost four times more market-rate mortgages were issued than in the same period last year. And in the corporate lending market, non-subsidized lending volumes have also grown.

And regarding the business surveys I already mentioned — we regularly survey businesses and see that businesses have increasingly stopped citing the lack of funds for working capital financing among their main current difficulties. To be precise, the share of such enterprises has fallen to 10%, almost one and a half times less than before we started cutting the rate. And now we actually see that last year's key rate increase, the high interest rates of a year ago, were a bitter but absolutely necessary medicine. A year ago, the key factor for businesses in those same surveys was rising costs — essentially inflationary risks. Then practically every fourth company we surveyed complained about it. And the sharpness of this issue — rising costs — has decreased. It hasn't disappeared, but decreased. Now one in five companies mentions it. This is a direct consequence of lower inflation resulting from tight monetary policy.

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Moderator3:20:34

Colleagues, please. Zulfia, I see a hand.

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Zulfia Khamitova3:20:39

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary GDP estimate since the beginning of the year? And do you see risks of the economy cooling, and what key rate is needed in Russia for economic activity to grow at a faster pace? Thank you.

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Elvira Nabiullina3:20:55

Well, by our estimates, overall in the first half of the year the economy continues moderate growth, as I already mentioned. For the first quarter, the Rosstat estimate you know — GDP declined by 0.2%. But we said that this was largely related to various factors: seasonal and calendar. April already brought GDP back into positive territory. And overall we estimate economic growth for January-April at 0.3%. For the first half of the year, we expect it to be around half a percentage point. According to preliminary data, overall business activity across the country in May is also growing. I already said we see an acceleration in consumer activity. We do not see risks of the economy cooling.

Let me remind you, the main cooling markers we use — and not only we, but most economists everywhere use them — are inflation falling significantly below target, rising unemployment, and declining real incomes of the population. None of these markers is present. And a balanced monetary policy helps protect the economy from this situation. As for your question about what rate level is needed for the economy to grow at a fast pace — for the economy to grow at sustainably high rates, it's not about the rate level. What's needed are mechanisms, institutions that stimulate the development of production capacity, increasing labor productivity. This is primarily determined by the efficiency of using factors of production.

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Moderator3:22:55

Colleagues, please, Artem.

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Artem Gorun3:23:01

Good day. Artem Gorun, Investfuchs. My question is about the labor market, which we've already touched on. We currently see unemployment remaining near historical lows, but the picture is contradictory because large companies continue reducing their staff. Meanwhile, the Ministry of Labor estimates that around 7.5% of job functions could be replaced by artificial intelligence in the near future. There seem to be contradictions here. How do you assess these changes? Does this indicate that labor market tensions are beginning to ease — which you've been expecting for so long as one of the main factors? And how might this affect your overall assessment and possible rate decisions? Thank you.

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Elvira Nabiullina3:23:46

Indeed, there are certain signs of cooling in the labor market situation, but I noted that we see the pace of tension reduction is decreasing. And we see in surveys that in recent months, the share of enterprises experiencing workforce shortages has not been declining for the past couple of months. And indeed, attention is often drawn to some workforce releases and downtime at a number of enterprises. These cases certainly attract attention. But the scale of this within the country is still not large and not growing. By our estimates, it's about 0.3% of all employed. So there are reductions, but the fact that unemployment is not rising shows that if there were layoffs in some companies, workers are finding jobs in other companies. As for artificial intelligence, we don't yet see a macroeconomic effect in terms of the labor market. It doesn't yet play a determining role, though for individual companies it increases labor productivity when they skillfully use AI. And the impact of this factor, I think, will increase over the years. But most importantly, I want to emphasize that the labor market is an important factor in rate decisions, but not the only one. We consider the full range of factors affecting the economy and inflation.

I can only repeat the general formula, as we do not disclose details. I want to reiterate once more that we do not disclose details, we do not disclose tactics, but we will take all measures and use all legal means to protect our legitimate rights.

M

Moderator4:16:09

Colleagues, please. Yakov.

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Yakov Timakov4:16:14

Good day. Yakov Timakov, Expert magazine. Alexey Borisovich. Not long ago, Kostantin Kapkan compared Nabiullina to Paul Volcker, the head of the Fed in the 1970s-80s. Volcker, as is known, was a proponent of tight monetary policy, the result of which was sustained low inflation on one hand and recession on the other. I am deliberately not drawing direct parallels now, since the Central Bank's arguments about sectoral decline sound convincing, and not everyone agrees with the thesis of a recession in the Russian economy. My question is not about the current situation, but about long-term consequences. After the Volcker shock in the United States, the Reaganomics era followed, expressed in tax cuts, deregulation, and strengthening the fuel sector.

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Elvira Nabiullina4:17:05

The government is taking necessary measures, but restoring supply may take time. And rising gasoline prices could also affect inflation expectations, as it is a fairly sensitive product for both people and companies. In addition, in recent weeks there has been a reversal in the dynamics of fruit and vegetable prices after an atypically strong decline in the spring. We already see this in operational data.

And finishing the inflation topic, I would like to draw attention to a statistical effect that will impact annual inflation indicators in the coming months. In July, there will be no increase in utility tariffs, as last year their indexation was moved to October. This means annual inflation may temporarily decrease slightly due to this factor, but this will only be a redistribution of price growth within the year.

Second, the economy. According to operational data for the second quarter of 2026, as we expected, economic activity indicators are improving. Temporary factors that constrained it at the beginning of the year, including calendar and weather factors, have been exhausted or reversed. In particular, a certain revival after a cold and snowy winter is occurring in construction, which was the main source of the GDP decline in the first quarter. If we analyze economic dynamics overall for the first half of the year, it corresponds to moderate growth in the production of goods and services. At the same time, the situation across industries varies greatly, and this heterogeneity has increased over the past year. This is largely linked to the structural restructuring of the economy.

If demand from the state accelerates significantly, the space for expanding private demand, both investment and consumer, under conditions of limited resources becomes smaller. A certain contribution to the strengthening of sectoral heterogeneity comes from shorter-term factors, such as the conjuncture of global commodity markets and the temporary removal of individual processing capacities.

As for consumer activity, its moderate growth continues. In spring months, car purchases intensified. Demand in the services segment remains high. Consumption is supported by wage growth. However, it has slowed somewhat, and enterprises are planning more moderate indexations in the future. Moreover, there is a fairly high dispersion in wage dynamics across industries and types of activity, reflecting the heterogeneity in the economy I spoke about.

Overall, labor market tension is decreasing slowly. According to information from our territorial institutions, in a number of regions, in recent months the reduction in labor shortages has stalled. Under these conditions, for sustainable reduction of pressure on costs and prices, further convergence of wage growth and productivity is necessary. And I want to emphasize: to increase productivity, it is primarily required that the workforce be maximally engaged where it brings the greatest return to the economy.

Third, monetary conditions. Interest rates in most segments of the financial market continued to decline smoothly under the influence of previous monetary policy decisions. At the same time, long-term OFZ yields increased somewhat, reflecting a rise in the term premium linked to uncertainty regarding fiscal policy. I want to note that most loans to companies, especially large and medium-sized ones, are now issued at floating rates. For such loans, a reduction in the key rate translates into a decrease in interest payments immediately and in full, not only for newly issued loans but also for existing ones.

The savings rate, although declining slightly, remains fairly high. Ruble deposits of the population in banks continue to grow. Among banking products, the popularity of savings accounts is increasing, and citizens' interest in financial market instruments and non-financial instruments continues to rise.

In April-May, credit growth accelerated noticeably. In retail, there was an activation of unsecured and auto lending, as well as market-rate mortgage lending. The growth rate of corporate credit increased significantly.

The dynamics of monetary indicators currently require special attention from us. First, if the acceleration of lending proves sustainable rather than a short-term spike after low values at the beginning of the year, this could indicate that current monetary conditions are no longer perceived by borrowers as restrictive. Second, the contribution of fiscal policy to money supply growth remains elevated, and with the revision of budget parameters, it will be even larger than we previously assumed. If credit growth continues at such high rates under these conditions, this may require tighter policy than anticipated in the baseline scenario.

The combined impact through the budget and credit channels has already led to money supply growth being at the upper bound of our expectations and even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightness from us than was built into our April forecast.

Now about external conditions. The situation in the Middle East led to a rise in commodity prices. These changes have already begun to translate into accelerating inflation in many countries. A number of central banks responded to rising pro-inflationary risks by raising rates. Global economic growth expectations are meanwhile declining.

For the Russian economy, disinflationary effects have so far predominated. Higher commodity prices led to increased export revenue and ruble appreciation. Import demand also grew, but not as significantly as the value of exports. The risks of a prolonged Middle Eastern conflict have decreased, but uncertainty remains regarding the scale of its pro-inflationary consequences for the global economy. They could affect the Russian economy through the prices of imported goods and logistics costs.

Moving to overall risks. According to our estimates, their balance has shifted more toward pro-inflationary. Regarding the risk of revising budget policy parameters, one can say it has essentially already materialized, but uncertainty remains regarding its scale. Fiscal and monetary policy simultaneously influence aggregate demand. If the contribution of fiscal policy grows in the interest of achieving priority objectives, then monetary policy must perform the role of a stabilizer, and its tightness must change accordingly to somewhat reduce the contribution of credit to aggregate demand. Only in this case can one avoid demand overshooting the capacity to increase supply and triggering another round of inflation.

Risks from labor shortages and inflation expectations remain. Pro-inflationary risks have risen related to temporary supply declines in individual industries. And I already spoke about risks from external conditions. The disinflationary risk remains lower domestic demand dynamics compared to our baseline estimates.

And finally, about our future decisions. Current price growth rates have declined noticeably, but we observe rising risks that could lead to accelerating inflation in the future. Particularly important for us are those risks that could sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags, and therefore our decisions must be forward-looking. And I want to emphasize that neither further reduction of the key rate nor the size of the step at each specific meeting are predetermined. We may need pauses to assess all incoming information and the effect of our previous decisions. And only maintaining a balanced approach, especially under conditions of high uncertainty, will allow achieving a sustainable result and stabilizing inflation at a low level. Thank you for your attention.

M

Moderator4:26:14

Thank you. Colleagues, please. Your questions, and don't forget to introduce yourselves and name your publication. Masha, please. First row.

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Maria Stepanova4:26:24

Good day, Interfax news agency, Maria Stepanova. What options were considered today? You already said that further steps are not predetermined, but has the probability increased that you will use 25 basis points again? Thank you.

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Elvira Nabiullina4:26:41

Thank you. A traditional question for us. This time, three rate options were discussed in detail: leave at 14.5%, cut by 25 basis points to 14.25%, or cut to 14% even. By the way, all these options appeared in economists' questions. There were weighty arguments for each option, and a substantial number of participants voiced their views. And in my view, the final decision is indeed a balanced consideration of all arguments, including from the standpoint of error costs.

And if we generalize, we can say that participants' positions differed along three main parameters. First, the assessment of the degree of sustainability of the observed sustainable inflation indicators over the past months — how sustainable they truly are. Second, the assessment of the scale of additional pro-inflationary factors that have emerged since the last Board meeting: on the demand side, the shift in budget plans for 2026 and subsequent years; on the supply constraint side, including the temporary reduction in fuel production. The third parameter is the assessment of the degree of tightness of monetary conditions. This is important in light of the significant acceleration of credit growth in the last two to three months.

Practically, all participants noted that space for further rate cuts has narrowed. But to what extent it has narrowed was and likely will be the subject of discussion at the next meeting.

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Moderator4:28:49

Thank you. Nastya, please.

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Anastasia Saveleva4:28:54

Thank you. Saveleva Anastasia, Interfax. You already said that the space for further rate cuts has narrowed. Could you say how much the budget factor influenced this? And do you see risks that this space could decrease further due to the situation on the fuel market, which may have secondary effects — rising prices for other groups of goods, for example food, and could lead to rising inflation expectations?

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Elvira Nabiullina4:29:29

We overall assess the reduction of space for key rate cuts. This will be discussed substantively at the next meeting, which is a key meeting. The factors influencing this and their specific values are difficult to measure, but we note that pro-inflationary factors have strengthened their impact. As for temporary supply-side factors, it is very important how the situation develops and whether these factors, from one-off, could transition into sustained price pressure, primarily through rising inflation expectations. It is clear that gasoline is a marker product. In June surveys, this is not yet reflected. We will look at the July inflation expectations surveys, which will be released before the next meeting. And it will be important to see how this affects costs across a wide range of products. These are factors that should be assessed. I will say again that this was indeed one of the main factors in making a balanced decision to reduce the step of the rate cut.

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Moderator4:30:46

Colleagues, please. Pavel.

P

Pavel4:30:52

Thank you. Given all the data, I would like to ask: in the press release you noted that a higher key rate trajectory may be required. Does this apply to 2028? Thank you.

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Elvira Nabiullina4:31:07

We will present our new key rate trajectory, as I already said, at the key meeting, and we will assess the dynamics that may be needed for 2026, 2027, and 2028. But most likely, the changes will mainly affect 2026-2027. But this will need to be reviewed and recalculated. Alexey Borisovich, please.

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Alexey Borisovich4:31:31

Yes. Not anticipating the July meeting, because it is clear that all factors affect the forecast, not just those that have changed at this moment. But we must proceed from the fact that if in 2028, say, fiscal policy is still not in a zero structural primary deficit mode, this would mean that monetary policy will most likely not be fully neutral in 2028, because it would have to compensate for that.

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Elvira Nabiullina4:32:10

All else being equal. And to what extent this change in fiscal policy will affect things — we will make an assessment of the neutral rate level. We do this annually before the main directions of monetary policy. So we cannot give specific figures now, but I think there will be more clarity on this by the next meeting.

M

Moderator4:32:38

Thank you. Colleagues, please. Nikita.

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Nikita Mitrofanov4:32:43

Good day. Mitrofanov Nikita, Telegram channel Economic. I continue to develop my macroeconomic model that tries to predict your decisions. Today the model predicted that with 70% probability you would cut the key rate by 50 basis points and with 30% probability by 25 basis points. This model decision was based mainly on calculated inflation data, and my calculated data were even worse than in your press release. Reality turned out to be better. But what surprised me: the 30% probability was because inflation expectations of the population are still quite high, unemployment is quite low, and a new factor has emerged that was highlighted very prominently — the structural deficit of the Russian Federation budget. In this context, I would like to ask: what influence does monetary policy have on the growth of money supply through the budget channel, since it seems that monetary policy and the rate decision primarily affect the private sector and to a lesser degree the budget channel?

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Elvira Nabiullina4:34:12

Well, naturally, we primarily influence the growth rate of lending, primarily market lending, through our decisions. That is why we always say that the share of subsidized loans is important for us, because subsidized loans are largely insensitive to our rate decisions. It is clear that we mostly affect private credit. Our monetary policy certainly has an effect on the budget, because the budget has internal debt, the cost of servicing that debt, plus subsidized programs where the budget has taken on a significant portion of the interest rate risk. But overall, monetary policy does not have a direct influence on the budget channel.

Rather, it is the other way around: there is a budget decision that the government prepares, the Duma adopts, to fulfill priority objectives. And in this situation, when there is full employment of resources, the Central Bank plays a compensating role. That is, we must, taking as given how much money flows through the budget channel, adapt our monetary policy so that through the private credit channel, the amount of money flowing into the economy does not accelerate inflation. And the difficulty also lies in the fact that our decisions act with a lag. I spoke about this lag: today's decisions will be reflected over three to six quarters. And that is why we say that greater early predictability of fiscal policy is important for us.

So there is an interconnection, but it is more like this: we act here as a stabilizer.

M

Moderator4:36:12

Thank you. Next question online from Sergey Enkvist, publication NGS55, city of Omsk. Did the Central Bank revise its key rate forecast after the St. Petersburg International Economic Forum stated that by the end of the year it should become single-digit?

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Elvira Nabiullina4:36:34

No. First, let me remind you that we have not revised the key rate forecast at this time. We revise it at key rate meetings. The next one will be in July, when we overall revise the forecast, because the key rate forecast depends on how we revise the forecast and how our vision of future developments changes. As for a single-digit rate level, our April forecast did not imply reducing the key rate to single-digit levels, that is below 10% this year. I said that pro-inflationary risks have even increased now, and if the key rate trajectory forecast is revised, it would more likely be upward, not downward.

And the space for reducing the key rate by the end of this year, and perhaps next year — and there was also a question about 2028 — has most likely shrunk. Not because we believe additional cooling of aggregate demand is needed, but because demand from the state will contribute more in 2026 and 2027 to both demand and GDP growth, and therefore the private sector's contribution must be more restrained. Otherwise, in fact, no additional GDP growth will occur — all this demand stimulation will simply go into accelerating inflation. We must not allow this, because everyone would lose: both the population and businesses. Even those currently asking for faster rate cuts — for them, this would mean rising costs. And with accelerating inflation, market rates will not fall; they will rise. Therefore, our task is to prevent this situation.

We certainly listen to and hear business experts and their arguments, including those voiced at the forum, and include them in the list of judgments that we and my colleagues discuss at the Board of Directors. But the decision is made based on our own independent analysis of data. We analyze a large amount of data, and not only statistical data, not only current data — I emphasize once again — but a medium-term forecast of how the situation will develop taking into account monetary policy lags.

M

Moderator4:39:21

Thank you. Colleagues, please. Evgeny, last row.

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Evgeny Grachov4:39:27

Evgeny Grachov, Izvestia newspaper. Tell me, in conditions where representatives of various agencies and businesses increasingly speak about the need for more active key rate cuts — does the Central Bank experience additional pressure on monetary policy issues? And have regulators, against the backdrop of these discussions, recently begun to consider a broader range of economic indicators in decision-making, particularly related to increased risks for business? Thank you.

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Elvira Nabiullina4:39:53

I have already said that we certainly take into account the opinion of experts, of business, and of government representatives. They quite reasonably speak in favor of rate cuts. We hear them not only from government agencies but also from the business side. But we do not perceive this as pressure. I have said this more than once: we make decisions independently based on our own analysis. We have always considered and continue to consider a broad spectrum of indicators — not only inflation and inflation expectations, but also the labor market, economic activity, including by industry and by region. We pay special attention to business surveys.

Let me remind you of our regular monitoring of 15,000 enterprises — you can familiarize yourself with its results. There is a lot of interesting information there, of course, and we conduct meetings with business. Once again, we discuss a broad range of indicators. Sometimes I have to hear some oversimplified interpretations, for example, about the labor market — that the Central Bank reduces everything to unemployment. This is absolutely not so. In my speeches and my colleagues' speeches, we constantly emphasize that we look at a large number of data characterizing the labor market situation, temporary employment, downtime, resumes, vacancies, wage growth rates, how this relates to productivity, by industry and region. Therefore, for each direction, this is a large list of data that we use. And your question is indeed correct, because when making decisions, one needs to use the entire complex of data characterizing the economic situation.

M

Moderator4:41:49

Thank you. Colleagues. Elena Fabrichna.

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Elena Fabrichna4:41:54

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I cannot help but ask — your prolonged absence gave rise to many rumors about personnel changes, about you wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina4:42:11

I can only confirm that I indeed had a cold and for some time lost my voice. And the only thing I can say is to thank those who sincerely worried about my health.

M

Moderator4:42:27

Colleagues, please. Georgy.

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Georgy Nedogibchenko4:42:31

Georgy Nedogibchenko, RBC. Is the Central Bank aware whether LSE is participating in discussions on tightening the parameters of the budget rule for 2027, with a reduction of the cutoff price to 50 dollars per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina4:42:51

Well, our position has not changed. First, we believe that the budget rule is a fundamental foundation of macroeconomic stability. The current base price is somewhat high from the standpoint of a conservative assessment of long-term trends in the oil market. In our view, it should be reduced to ensure long-term fiscal stability of public finances and macroeconomic stability. The level of the cutoff will of course be proposed by the government. But I should note that with a lower base price of the budget rule, monetary policy will certainly account for this when we discuss our decision.

Alexey Borisovich, we have a good understanding of the progress of this discussion from the standpoint of our monetary policy decision now, understanding what will happen with the budget rule in 2027.

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Moderator4:44:06

Thank you. Colleagues. Yulia, please.

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Yulia Rostorgoeva4:44:11

Good day. Yulia Rostorgoeva, Market Power. The Iran conflict, if we believe US authorities' statements, is concluded. Oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and the economy overall in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina4:44:34

When you speak about balance of payments risks from the conclusion of the conflict, you probably mean that oil prices may begin to decline. But the point is that these risks are precisely what is neutralized or compensated by the actions of the budget rule, about which we spoke. Therefore, we do not see any significant risks from this point of view.

As for the overall impact, the cumulative effect is probably still difficult to assess, because evaluating the consequences of the conflict — even if it is finally concluded — on the global economy, on global inflation is premature. We see that in many countries this has already affected price growth and economic dynamics, and this too could influence the Russian economy through future demand for our products. For now, the impact of this crisis has been disinflational: exporters' revenue grew, the exchange rate strengthened. But there are certainly pro-inflationary effects as well — rising logistics costs for our businesses, and rising import prices. Pro-inflationary risks exist. But we said that the longer the conflict continues, the greater the pro-inflationary risks. And we now believe that if the conflict concludes, pro-inflationary risks decrease from this side compared to what we previously thought.

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Moderator4:46:12

Thank you. And the next question online from Marina Ukhapova, Nizhegorodskaya Pravda newspaper, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova4:46:21

Hello. The course of key rate reduction has been maintained for a year. What effect has this given for the lending market? Perhaps accessible loans for businesses, mortgage accessibility, some new credit offerings?

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Elvira Nabiullina4:46:39

Yes, the reduction of the key rate has led to credit growth. And we see this in market lending segments. For example, in four months — January through April — almost four times more market-rate mortgages were issued than in the same period last year. In the corporate lending market, the volumes of non-subsidized lending also grew.

And in business surveys, which we conduct regularly, we see that businesses have increasingly stopped naming the shortage of funds for working capital financing among their main current difficulties. If we speak precisely, the share of such enterprises has dropped to 10%. That is almost one and a half times less than before we started cutting the rate.

And now we actually see that the high interest rates of a year ago were bitter but absolutely necessary medicine. A year ago, the key factor for businesses, according to the same surveys, was rising costs — essentially, inflationary risks. Then almost every fourth company we surveyed complained about this. The acuity of the cost growth issue has decreased — it hasn't disappeared, but decreased. Now one in five companies speaks about it. And this is a direct consequence of inflation reduction as a result of tight monetary policy.

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Moderator4:48:35

Colleagues, please. Zulfia, I see your hand.

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Zulfia Khamitova4:48:40

Hello. Zulfia Khamitova, RIA Novosti. Do you have a preliminary GDP estimate since the beginning of the year? And do you see risks of economic overheating? And what key rate is needed in Russia for economic activity to grow at higher rates? Thank you.

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Elvira Nabiullina4:48:56

According to our estimates, overall in the first half of the year the economy continues moderate growth. For the first quarter, this is Rosstat's estimate — you know it: GDP decreased by 0.2%. But we said this was largely linked to various seasonal and calendar factors. April already brought GDP into positive territory. And overall we estimate GDP growth for January-April at 0.3%. By the end of the half-year, we expect around half a percentage point. According to operational data, overall business activity across the country in May is also growing.

We do not see risks of economic overheating. Let me recall the main markers of overheating that we use — not only us, but most economists everywhere use them — these are inflation falling well below the target, rising unemployment, and falling real incomes of the population. None of these markers are present.

And balanced monetary policy helps protect the economy from that situation. Your question was about what rate level is needed for the economy to grow at high rates. For the economy to grow sustainably at high rates, the question is not about the rate level. What is needed are mechanisms, institutions that stimulate the development of production capabilities and increase labor productivity. This is primarily determined by the efficiency of production factor utilization.

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Moderator4:50:56

Colleagues, please. Artem.

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Artem Gorun4:51:02

Good day. Artem Gorun, RIA Novosti. My question will be about the labor market, which we have already touched on. We currently see that unemployment remains near historic lows, but at the same time the picture is contradictory: large companies continue to reduce their staffs, while the Ministry of Labor estimates that about 7.5% of labor functions may be replaced by artificial intelligence in the near future. There are contradictions here. How do you assess these changes? Does this show that labor market tension is beginning to subside, which you waited for so long, naming it as one of the main factors? And how might this affect your overall assessment and possible rate decisions?

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Elvira Nabiullina4:51:47

Indeed, there are certain signs of cooling in the labor market situation, but I noted that we see the pace of tension reduction is slowing. We see from surveys that in recent months, the share of enterprises experiencing labor shortages has not declined for the past couple of months.

And indeed, attention is often drawn to some workforce release, to downtime at a number of enterprises. These cases certainly attract attention, but their scale nationwide is still small and not growing. According to our estimates, this is about 0.3% of all employed. There are layoffs, but the fact that unemployment is not growing shows that if there were layoffs at some companies, workers find jobs at other companies.

As for artificial intelligence, we do not yet see a macroeconomic effect from it in terms of the labor market. It does not yet play a defining role. For individual companies, it increases labor productivity — those that skillfully use artificial intelligence. But the impact of this factor, I think, will increase with years. And most broadly, I want to emphasize: the labor market is an important factor in rate decisions, but not the only one. We take into account the entire set of factors that affect the economy and inflation.

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Moderator4:53:39

Marina, yes, please.

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Marina Pimionova4:53:43

Marina Pimionova, NTV. Business News. Continuing the topic of business pressure, and a bit about sports. The World Cup in football is currently underway. In football, there is a concept called an own goal — scoring in your own net. Why can't the Central Bank convince businesses, many financially literate people, that it is not kicking the ball into the Russian economy's net? Thank you.

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Elvira Nabiullina4:54:07

Yes, well, you know, we probably feel more like a goalkeeper defending against inflation. And perhaps in many matches, the outcome is decided precisely by the reliability of the goalkeepers. Someone has to hold these gates, protect them. Alexey Borisovich, anything to add?

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Alexey Borisovich4:54:35

I can only remind you of the Russia-Spain match in 2018. Its result was decided in penalties thanks to the reliability of our goalkeeper.

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Moderator4:54:55

Colleagues, please. Nastya, second row.

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Anastasia Bashkatova4:55:00

Hello. Thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. Tell me, what indicator could the Central Bank now present as convincing evidence to the public of the effectiveness of its monetary policy? And the second part of the question: given that achieving the 4% inflation target still poses difficulties, how does the Central Bank relate to proposals from a number of experts to calculate and use not the conventional overall consumer inflation, but a different inflation cleared of the influence of factors that have strongly changed the economic situation since 2022 — in particular, the factor of the special military operation in all its manifestations or the factor of stricter sanctions, and so on?

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Elvira Nabiullina4:55:49

Thank you. You are absolutely right about convincing indicators. The criterion of truth, as is known, is a fact. And so let's look at the facts, including annual inflation. Annual inflation over the past year has halved. And this did not happen by itself. It was not a happy coincidence of circumstances. The circumstances, as you see, played in the other direction — pro-inflationary risks materialized. And this is primarily the result of monetary policy.

But why you are right — this effect is sometimes questioned. Perhaps someone forgets that the rate works with a lag. It seems to them: when the rate is high, inflation is high, we start cutting the rate, and inflation falls. But when we raised the rate, the effect acts over three to six quarters. And the fact that inflation has relatively slowed down today is, of course, thanks to that high rate we had for an extended period, starting at 21%.

And if it had been otherwise — for example, we kept the 21% rate for a sufficiently long time. It must be acknowledged that from October 2024 to the summer of last year, inflation began to decline anyway. So the logic that from a rate increase, high inflation grows — this does not withstand criticism in my view. When the rate was raised, inflation started falling after the peak last spring. And seeing sustained inflation slowdown, we are cutting the rate.

Now the important question. Indeed, many experts propose that we not orient ourselves toward overall inflation indicators, but toward sustainable inflation indicators cleared of everything that rises, and then say: 'What remains that doesn't rise, and then cut the rate — monetary policy will be completely different.' You can clear inflation in any way you like. We, by the way, show indicators cleared of the influence of utility tariff growth, of tourism services, of this and that — we have many such indicators. But interest rates will not become lower because of this.

If your overall inflation is 10%, and your cleared inflation — however you cleared it — is 2%, credit rates will not be 2%; they will be above 10% in any case. Therefore, if we want more moderate rates, we need to reduce overall inflation. And for people it does not matter what is driving high inflation. The purchasing power of their savings and income is determined by overall price growth. We can say: 'Well, prices didn't rise for this, but they rose for everything else.' And this is very important for people too.

So in our view, analytically you can look at any cleaned measures, but you must orient toward reducing overall inflation and overall price pressure.

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Alexey Borisovich4:59:06

Yes. Monetary policy cannot influence the root causes of that inflation linked to supply-side changes. But what it can do is bring demand into alignment with these circumstances, and then inflation will be low and rates will be moderate.

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Moderator4:59:32

Colleagues, please. Dmitry.

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Dmitry Maroko4:59:36

Dmitry Maroko, Russia 24. This week a court rejected the Ukrtransnafta motion to suspend enforcement proceedings in the lawsuit filed by the Central Bank. What does this mean in practice? Does this bring us closer to the return of frozen assets? Thank you.

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Elvira Nabiullina4:59:52

Well, here I can probably only repeat the general formula, as we do not disclose details. I want to reiterate once more that we do not disclose details, we do not disclose tactics, but we will take all measures and use all legal means to protect our legitimate rights.

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Moderator5:00:12

Colleagues, please. Yakov.

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Yakov Timakov5:00:17

Good day. Yakov Timakov, Expert magazine. Alexey Borisovich. Not long ago, Kapkan and Zabotkin were compared to Paul Volcker, the head of the Fed in the 1970s-80s. Volcker, as is known, was a proponent of tight monetary policy, the result of which was sustained low inflation on one hand and recession on the other. I am deliberately not drawing direct parallels now, since the Central Bank's arguments about sectoral decline sound convincing, and not everyone agrees with the thesis of a recession in the Russian economy. My question is not about the current situation, but about long-term consequences. After the Volcker shock in the United States, the Reaganomics era followed, expressed in tax cuts, deregulation, and strengthening the fuel sector.

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Elvira Nabiullina5:06:29

Continuing at such a high pace may require us to adopt a tighter policy than envisioned in the baseline scenario. The combined impact through the budget and credit channels has already pushed money supply growth to the upper bound of our expectations, or even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightness than was assumed in our April forecast.

Now on to external conditions. The situation in the Middle East has led to rising commodity prices. These changes have already begun translating into accelerating inflation in many countries. A number of central banks responded to rising inflationary risks by raising rates. Global growth expectations are declining. For the Russian economy, disinflationary effects have prevailed so far. Higher commodity prices have led to increased export revenue and ruble appreciation. Import demand has also grown, but not as significantly as export volumes. Risks of a prolonged Middle Eastern conflict have decreased, but uncertainty remains about the scale of its inflationary consequences for the global economy, which could affect Russia through import prices and logistics costs.

Turning to risks in general: our assessment is that the balance has shifted more toward inflationary risks. Regarding the risk of revising budget policy parameters, it is essentially already materializing, but uncertainty about its scale remains. Budget and monetary policy simultaneously affect aggregate demand. If the contribution of budget policy grows to achieve priority objectives, monetary policy must play a stabilizing role — its tightness must adjust to partially reduce the credit contribution to aggregate demand. Only in this way can we prevent aggregate demand from overshooting the economy's capacity to increase supply, which would trigger another round of inflation.

Risks from labor shortages and inflationary expectations persist. Inflationary risks related to temporary supply reductions in certain sectors have risen. As for risks linked to external conditions, I have already spoken about them. A disinflationary risk remains lower-than-expected domestic demand growth.

Finally, on our future decisions. Current price growth has slowed noticeably, but we see rising risks that could lead to accelerating inflation ahead. Particularly important for us are those risks that may sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags, so our decisions must be forward-looking. I want to emphasize that neither further key rate cuts nor the size of the step at any particular meeting are predetermined. We may need pauses to assess all incoming information and the effects of our previous decisions. Only by maintaining a balanced approach, especially amid high uncertainty, can we achieve a lasting result and stabilize inflation at a low level. Thank you for your attention.

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Moderator5:10:17

Thank you, colleagues. Please ask your questions, and don't forget to introduce yourselves and name your publication. Masha, please — first row.

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Maria Stepanova5:10:27

Hello, Informagent Stas, Maria Stepanova. What options were considered today? You already said that further steps are not predetermined, but has the probability increased that you would again use 25 basis points? Thank you.

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Elvira Nabiullina5:10:44

Thank you. A traditional question for us — yes, three rate options were very thoroughly considered this time: keeping 14.5%, cutting to 14.25%, and cutting to exactly 14%. Incidentally, all of these options appeared in economists' questions. There were weighty arguments for each, and a considerable number of discussion participants spoke in favor of each. In my view, the final decision is indeed a balanced consideration of all arguments, including from the perspective of the cost of error.

To generalize, positions of discussion participants differed along three main parameters. First was the assessment of how sustainable the observed indicators of underlying inflation have been in recent months. Second was the assessment of the scale of additional inflationary factors that have emerged since the last board meeting — from the demand side, the shift in budget plans for 2026 and subsequent years, and from the supply side, the temporary reduction in fuel production. The third parameter was the assessment of the degree of tightness of monetary conditions, which is important given the significant acceleration in credit growth over the past 2–3 months. Practically all participants noted that room for further rate cuts has narrowed, but the extent of that narrowing was — and likely will continue to be — a subject of discussion at the next meeting. Thank you.

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Anastasia Saveleva5:12:57

Anastasia Saveleva, Interfax. You already said room for further rate cuts has narrowed. Could you say how much the budget factor influenced this? And do you see risks that this room could shrink further due to the situation on the fuel market, which could have secondary effects — price increases for other goods such as food — and lead to rising inflationary expectations?

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Elvira Nabiullina5:13:31

We do assess a reduction in room for cutting the key rate. This will be discussed concretely at the next meeting, which is a structural meeting. But the factors influencing this — their specific magnitude is hard to measure. We do note, however, that inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it is very important how the situation develops and whether these factors transition from one-off to sustained price pressure, primarily through rising inflationary expectations. Currently, in June surveys, that is not yet the case. We will look at July surveys on inflationary expectations, which will be released before the next meeting. It will also be important to assess how this affects costs across a broad range of goods. So these are the factors that need to be evaluated. I will say again that this was indeed one of the key factors in making a balanced decision to reduce the pace of rate cuts.

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Moderator5:14:49

Colleagues, please. Pavel.

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Pavel5:14:54

Thank you. You noted in the press release that a higher key rate trajectory may be needed. Does this relate to 2028? Thank you.

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Elvira Nabiullina5:15:10

We will present our updated view of the key rate trajectory, as I already said, at the structural meeting, and will assess the dynamics that may be required for 2026, 2027, and 2028. Most likely, the changes will affect 2026–2027 more, but we will need to revisit and recalculate. Yes, please — Alexey Borisovich.

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Alexey Borisovich5:15:34

Yes. Without pre-empting the July meeting, since the forecast is affected by all factors, not just those that have changed to date — we must proceed from the assumption that if in 2028 budget policy is still not in a mode of zero structural primary deficit, this would mean monetary policy in 2028 most likely would not be fully neutral, because it would need to compensate for that. Again, all else being equal — including how this change in budget policy affects the assessment of the neutral rate level, which we do annually before setting the main guidelines for monetary policy. So indeed, specific figures cannot be stated now, but by the next meeting there should be more clarity.

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Moderator5:16:41

Thank you. Colleagues, please. Nikita.

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Nikita Mitrofanov5:16:46

Hello. Nikita Mitrofanov, Telegram channel Economical. I continue developing my macroeconomic model that tries to predict your decision. Today the model predicted a 70% probability you would cut the key rate by 0.5% and a 30% probability of a 0.25% cut. The model's decision — not yours — was primarily based on calculated inflation data, and my calculated data were even worse than in your press release, meaning reality turned out better, which in my model made a 0.5% cut seem more likely. But my surprise is: the 30% probability was due to the fact that inflationary expectations among the population remain high, unemployment is quite low, and a new factor has emerged that has been prominently discussed — the structural deficit of the Russian Federation budget. In this context, I would like to ask: what influence does monetary policy and its tightness have on money supply growth through the budget channel? Because this is a factor, but at the current moment it's starting to seem that monetary policy and the rate decision primarily affect the private sector and to a lesser degree the budget channel. Thank you.

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Elvira Nabiullina5:18:15

Well, naturally we primarily affect the pace of lending growth through our decisions — market lending first and foremost. That is why we always emphasize the importance of the share of subsidized loans, because subsidized loans as a whole are insensitive to our rate decision. Clearly, we influence primarily private credit. Our monetary policy does have an effect on the budget, because the budget has internal debt and debt servicing costs. Plus the subsidized programs I mentioned, where the budget has taken on a significant part of the interest rate risk. But overall, monetary policy does not have a direct influence on the budget channel. Rather, the budget makes decisions — the government prepares them, the Duma adopts them — to achieve priority objectives. In this situation, with full employment of resources, the Central Bank plays a compensating role. Accepting as given how much money flows through the budget channel, we must adapt our monetary policy so that through the private credit channel, just enough money flows into the economy to prevent inflation from accelerating. The complexity is also that our decisions take effect with a lag — I spoke about this lag. Today's decisions will be reflected over three to six quarters. That is why we emphasize the importance of earlier predictability of budget policy. So the interconnection exists, but it is more of a stabilizer role on our part.

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Moderator5:20:15

Thank you. The next question online is from Sergey Enkvist, publication NGS55, Omsk. Has the Central Bank revised its key rate forecast after statements at the St. Petersburg International Economic Forum that by year-end it should be single-digit?

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Elvira Nabiullina5:20:37

No. First, let me remind you that we do not revise the key rate forecast currently. We revise it at structural rate meetings. The next will be in July, when we revise the overall forecast, since the rate forecast depends on how we reassess the outlook going forward. As for a single-digit rate, our April forecast did not assume the key rate would fall to single digits — below 10% — this year. I have said that inflationary risks have even grown, and if the trajectory forecast is revised, it is more likely upward than downward. And room for cutting the key rate through year-end and perhaps into next year — and the question about 2028 was also asked — has most likely shrunk. And not because we believe additional cooling of aggregate demand is needed — I emphasize, aggregate demand. We do not believe aggregate demand should cool further. Rather, because government demand will contribute more to aggregate demand and GDP growth in 2026 and 2027. And therefore, the private sector's contribution must be more restrained; otherwise, no additional GDP growth will occur — all this demand stimulation will simply accelerate inflation again. We must not allow this, because everyone would lose: both the population and businesses. Even those currently calling for faster rate cuts — for them it would mean rising costs. With accelerating inflation, market rates will not fall, they will rise. Our task is to prevent this. We certainly listen to and hear business experts and their arguments, including those voiced at the forum, and include them among the views we discuss at the board meeting. But we make decisions based on independent analysis of data. We analyze a large volume of data — not only statistical and not only current data, but medium-term forecasts of how the situation will develop, accounting for monetary policy lags.

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Moderator5:23:24

Thank you. Colleagues, please. Evgeny, last row.

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Evgeny Grachov5:23:30

Evgeny Grachov, Izvestia newspaper. Tell me, in a situation where representatives of various agencies and businesses increasingly speak about the need for more active key rate cuts, does the Bank of Russia face additional pressure on monetary policy matters? And have regulators in light of these debates recently begun considering a broader spectrum of economic indicators in decision-making, particularly those related to increased risks for businesses? Thank you.

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Elvira Nabiullina5:23:56

Well, I have already said that we certainly consider the opinions of experts, businesses, and many voices in favor of rate cuts. They are quite understandable. Indeed, there are many such voices not only from agencies but also from businesses. But we do not perceive this as pressure. I have said this repeatedly — we make decisions independently based on our own analysis. We have always considered and continue to consider a broad spectrum of indicators, not just inflation and inflationary expectations, but also the labor market and economic activity, by industry and by region. We pay particular attention to business surveys. Our regular monitoring of 15,000 enterprises — results are publicly available, there is much interesting data. We conduct meetings with businesses. Again, a broad range of indicators we discuss. Sometimes one hears a somewhat oversimplified notion — for example, that the Bank of Russia reduces everything to unemployment. This is absolutely not so. In my speeches and those of my colleagues, we always emphasize that we look at a large number of data points characterizing the labor market situation: temporary employment, downtime, resumes, vacancies, wage growth rates, how it relates to productivity, by industry and region. So for each direction, it is a large list of data we use. And your question is indeed correct, because when making decisions, one must use the full set of data characterizing the economic situation.

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Moderator5:25:52

Thank you. Colleagues. Lena Fabrichna.

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Elena Fabrichna5:25:58

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I can't help but ask — your prolonged absence generated numerous rumors about personnel changes, about you wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina5:26:15

I can only confirm that I did indeed have a cold and temporarily lost my voice. And the only thing I can say is to thank those who sincerely worried about my health.

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Moderator5:26:30

Colleagues, please. Georgy.

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Georgy Nedogibchenko5:26:34

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of who is participating in discussions on tightening budget rule parameters for 2027, reducing the cutoff price to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina5:26:54

Our position has not changed. First, we consider the budget rule to be a foundational element of macroeconomic stability. The current base price is somewhat high from the perspective of conservative long-term oil market trends, and in our view should be lowered to ensure long-term fiscal sustainability, macroeconomic stability. Of course, the specific cutoff level is for the government to propose. But at a lower base price for the budget rule, monetary policy would certainly have a greater foundation for macroeconomic stability. Monetary policy will account for this when we discuss our decisions. Alexey Borisovich, we have a good understanding of this discussion and how it affects current monetary policy decisions, understanding what will happen with the budget rule in 2027.

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Moderator5:28:09

Thank you. Colleagues, please. Yulia.

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Yulia Rostorgoeva5:28:14

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, if one believes US authorities' statements, is over. Oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and the economy as a whole in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy over the medium term? Thank you.

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Elvira Nabiullina5:28:37

When you speak of balance of payments risks from the end of the conflict, you probably mean oil prices could start declining. But these risks are precisely neutralized or compensated by the actions of the budget rule we discussed. So we probably don't see significant risks from this perspective. As for the overall impact — it is still hard to assess, because assessing the consequences of the conflict for the global economy and global inflation, even if it is ultimately ended, is premature. We see it has already affected price growth and economic dynamics in many countries, which could also affect the Russian economy through future demand for our products. So far, the impact of this crisis has been disinflationary, because export revenue grew, the exchange rate strengthened. But there are also inflationary effects — certainly already now, including rising logistics costs for our businesses and rising import prices. So inflationary risks exist too. But we said that the longer the conflict goes on, the greater the inflationary risks. We now believe that if the conflict ends, those risks diminish from this side compared to what we thought before.

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Moderator5:30:15

Thank you. The next question online is from Marina Ukhapova, Nizhegorodskaya Pravda newspaper, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova5:30:25

Hello. The course of rate cuts has been maintained for a year now. What effect has this had on the lending market? Perhaps more accessible loans for businesses, mortgage availability, some new credit offers.

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Elvira Nabiullina5:30:42

Yes, the rate cut has led to lending growth. We see this in market lending segments. For example, over four months — January through April — almost four times more market-rate mortgages were issued compared to the same period last year. Corporate lending volumes also grew, with non-subsidized lending expanding. We regularly survey businesses and see that they have been citing the lack of financing for working capital as a major current difficulty less frequently. To be precise, the share of such enterprises has dropped to 10% — nearly 1.5 times lower than before we started cutting rates. And we now see that the high key rate of a year ago was a bitter but absolutely necessary medicine. A year ago, the key business concern in those same surveys was rising costs — essentially inflationary risks. Then roughly every fourth company we surveyed complained about it. The severity of that issue has decreased — it hasn't disappeared, but decreased. Now one in five companies mentions it. This is a direct consequence of reduced inflation resulting from tight monetary policy.

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Moderator5:32:38

Colleagues, please. Zulfia, I see your hand.

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Zulfia Khamitova5:32:43

Hello, Zulfia Khamitova, Rinovosti. Do you have a preliminary GDP estimate since the beginning of the year? Do you see risks of economic cooling? And what key rate is needed in Russia for economic activity to grow at a higher pace? Thank you.

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Elvira Nabiullina5:32:59

By our estimates, overall the economy continues to grow moderately in the first half of the year. I have already mentioned this. For Q1, this is Rosstat's estimate you know — GDP declined by 0.2%, but we said that was largely due to seasonal and calendar factors. April brought GDP back into positive territory. Overall, we estimate January–April growth at 0.3%. By mid-year, we expect about half a percentage point. By preliminary data, business activity across the country is also growing in May. I have already said we see an acceleration in consumer activity. We see no risks of economic cooling. Let me remind you of the key markers of cooling that we use — and not just we, but most economists everywhere use these — a drop in inflation well below target, a rise in unemployment, and a decline in real incomes. None of these markers is present. What helps protect the economy from this is balanced monetary policy. Your question — what rate level is needed for high growth? For the economy to grow sustainably at high rates, it is not about the rate level. What is needed are mechanisms and institutions that stimulate the development of production capacity, increase labor productivity. This is primarily determined by the efficiency of using factors of production.

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Moderator5:34:59

Colleagues, please. Artem.

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Artem Gorun5:35:05

Good day. Artem Gorun, Investfjutcher. My question is about the labor market, which we have already touched on. We see unemployment near historical lows, but the picture is contradictory — large companies continue cutting staff, while the Ministry of Labor estimates that around 7.5% of job functions could be replaced by artificial intelligence in the near future. There seem to be contradictions here. How do you assess these changes? Does this show that labor market tightness is beginning to ease — the one you waited so long for, calling it one of the key factors? And how might this affect your overall assessment and possible rate decisions? Thank you.

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Elvira Nabiullina5:35:51

There are indeed certain signs of labor market cooling, but I noted that we see the pace of that easing slowing. We see this in surveys. Over the past few months, the share of enterprises experiencing labor shortages has not declined for the past couple of months. And while attention is often drawn to certain layoffs and downtime at some enterprises — these cases certainly attract attention — the scale nationwide is still small and not growing. By our estimates, it is about 0.3% of all employed. So there are layoffs, but the fact that unemployment is not rising shows that if workers were laid off at some companies, they are finding jobs at others. As for artificial intelligence, we do not yet see a macroeconomic effect on the labor market. It is not yet playing a decisive role. For some companies, it increases labor productivity — those that skillfully use AI. But its influence will grow over the years. And most broadly, I want to emphasize: the labor market is an important factor in rate decisions, but not the only one. We consider the full set of factors affecting the economy and inflation.

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Moderator5:37:42

Marina, yes, please.

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Marina Pimionova5:37:46

Marina Pimionova, NTV. Business News. Continuing the theme of business pressure, and a bit about sports — the World Cup is underway. In football, there's a concept called an own goal — scoring against yourself. Why can't the Central Bank convince businesses, many financially literate people, that it is not kicking the ball into Russia's own net? Thank you.

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Elvira Nabiullina5:38:10

Well, you know, we rather see ourselves as the goalkeeper — defending against inflation. And there are probably many matches where the outcome is decided precisely by the reliability of the goalkeepers. Someone has to hold the line and protect those goals. Alexey Borisovich, anything to add?

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Alexey Borisovich5:38:38

I can only remind you of the Russia–Spain match in 2018. Its result was decided in a penalty shootout thanks to the reliability of our goalkeeper.

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Moderator5:38:58

Colleagues, please. Nastya, second row.

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Anastasia Bashkatova5:39:03

Hello, thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank present as convincing evidence to the public of the effectiveness of its monetary policy? And second part: given that reaching the 4% inflation target still poses difficulties, how does the Central Bank feel about proposals from a number of experts to calculate and consider in monetary policy not the usual overall consumer inflation, but a different inflation — cleaned of factors that have significantly changed the economic situation since 2022, such as the special military operation and its manifestations, or harsher sanctions and so on? Thank you.

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Elvira Nabiullina5:39:52

Thank you. You are absolutely right. Regarding convincing indicators — the criterion of truth, as we know, is fact. So let's look at the facts, including year-over-year inflation. Year-over-year inflation over the past year has halved. And this did not happen by itself. It was not a fortunate coincidence. The circumstances were actually working the other way — inflationary risks materialized. And this is primarily the result of monetary policy. But why you are right — this effect is sometimes questioned. Perhaps someone forgets that the rate works with a lag. It seems to them: high rate, high inflation; we start cutting the rate, inflation falls. But when we raised the rate, the effect operates over three to six quarters. The fact that inflation has relatively slowed today is, of course, thanks to that high rate we maintained for an extended period, starting at 21%. And had it been otherwise — we held the rate at 21% for a considerable time. From October 2024 through the summer of last year, inflation began declining. So the logic that a rate hike from high inflation causes inflation to grow does not withstand scrutiny in my view. After the rate hike, inflation began declining after its peak last spring. And seeing this sustained slowdown in inflation, we are cutting the rate. Now an important question. Indeed, many experts propose that we not target overall or underlying inflation — strip away everything that is growing and say: 'What's left is what's not growing, and then cut the rate.' Our monetary policy would be completely different. You can clean inflation however you want. We, by the way, show inflation figures cleaned of utility tariff growth, cleaned of tourism services influence, and so on. We have many such indicators. But interest rates will not become lower because of that. If overall inflation is 10% — let's say — and your cleaned inflation is 2%, credit rates will not be 2%; they will be above 10% in any case. So if we want more moderate rates, we need to reduce overall inflation. And it doesn't matter to people what is driving high inflation. The purchasing power of their savings and incomes is determined by the overall price increase across everything. Then we can say: 'Well, prices didn't rise on this, but they rose on everything else.' And that matters greatly for people too. So in our view, analytically you can look at any cleaned measures, but the orientation must be toward reducing overall inflation and overall price pressure. Yes, Alexey Borisovich.

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Alexey Borisovich5:43:11

And it is clear that monetary policy cannot influence the root causes of inflation related to supply-side changes. But what can it do? It can bring demand into alignment with those circumstances, and then inflation will be low and rates will be moderate.

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Moderator5:43:35

Colleagues, please. Dmitry.

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Dmitry Maroko5:43:39

Dmitry Maroko, Rossiya 24. This week a court rejected Euroclear's motion to suspend enforcement proceedings in the Central Bank's lawsuit. What does this mean in practice? Does it bring us closer to recovering frozen assets? Thank you.

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Elvira Nabiullina5:43:55

I can probably only repeat the general formula here, because we do not disclose details. Once again, we do not disclose details, we do not disclose tactics. I can only reconfirm that we will take all measures and use all legal means to protect our legitimate rights.

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Moderator5:44:15

Colleagues, please. Yakov.

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Yakov Timakov5:44:20

Good day. Yakov Timakov, Expert magazine. A question for Alexey Borisovich. Not long ago, Zabotkin's rate was put in the same category as the Volcker shock. The Fed Chair in the seventies–eighties, Paul Volcker, was a proponent of tight monetary policy, the result of which was sustained low inflation on one hand and recession on the other. I am intentionally not drawing direct parallels since the Central Bank's arguments about sectoral downturn sound convincing, and not everyone agrees with the recession thesis for the Russian economy. My question is not about the current situation but about long-term consequences. After the Volcker shock in the US came no less famous Reaganomics — tax cuts, deregulation, economic revival. What could be an analogue for Russia after the period of tight monetary policy? Thank you.

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Elvira Nabiullina5:45:15

Yes, it is a very interesting question. But I think, frankly, that monetary policy and the rate are tools for the Central Bank to maintain low and stable inflation. They should not be a tool for structural reforms or economic growth acceleration. For that, indeed, structural reforms are needed. So there should not be expectations that one rate will solve all problems. As for the consequences — our main task today is to ensure that the high rate brings inflation down to target, and then it will naturally decrease. The rate is a balancing mechanism. It should not be a shock tool — only when absolutely necessary. I think we will have enough time for structural reforms. I would not draw parallels with the eighties, because the world economy and Russia's economy were very different then. The task is to maintain low and stable inflation so that it does not become a barrier to economic development.

I also wanted to note — regarding the economy: by preliminary data, economic activity indicators are improving in Q2 2026, as we expected. Temporary factors that restrained it at the start of the year — calendar, weather factors — have been exhausted or reversed. In particular, certain recovery after a cold and snowy winter is occurring in construction, which was the main source of the Q1 GDP decline. Analyzing economic dynamics overall for the first half, it corresponds to moderate growth in goods and services output. At the same time, the situation across industries varies greatly, and this heterogeneity has increased over the past year. Largely this is linked to structural restructuring of the economy.

If state demand accelerates substantially, room for expanding private demand — investment and consumer — in conditions of limited resources becomes smaller. A certain contribution to enhanced sectoral heterogeneity comes from shorter-term factors such as global commodity market conditions and temporary withdrawal of certain production capacities. As for consumer activity, its moderate growth persists. In spring months, car purchases accelerated. Demand in the services segment remains high. Wage growth supports consumption, though it has slowed somewhat, and enterprises are planning more moderate indexation going forward. Moreover, there is significant dispersion in wage dynamics across industries and activity types, reflecting the economic heterogeneity I mentioned. Overall, labor market tightness is declining slowly. According to our regional offices, in a number of regions, the reduction in labor shortages has stalled in recent months. Under these conditions, for sustainable reduction in cost and price pressure, further convergence of wage growth and productivity growth is needed. And I want to emphasize: to increase productivity, the main requirement is that workers be maximally deployed where they bring the greatest return to the economy.

Third — monetary conditions. Interest rates in most segments of the financial market continued to decline smoothly under the influence of previous monetary policy decisions. At the same time, long-term OFZ yields rose somewhat, reflecting increased term premium associated with uncertainty about fiscal policy. I would note that most corporate loans, especially for large and medium enterprises, are currently issued at floating rates. For such loans, a reduction in the key rate translates into lower interest payments immediately and in full — not only for new loans but also for existing ones.

The savings rate, though declining slightly, remains quite high. Ruble deposits continue to grow. Among banking products, savings accounts are gaining popularity; citizens' interest in financial market instruments and non-financial instruments continues to rise. In April–May, credit growth accelerated noticeably. In retail, unsecured lending and auto loans were activated, as well as market-rate mortgage lending. Corporate credit growth rates increased significantly. The dynamics of monetary indicators currently require special attention from us. First, if the credit acceleration proves to be a sustained trend rather than a short-term rebound after low values at the start of the year, this could mean that current monetary conditions are no longer perceived by borrowers as restrictive.

Second, the budget policy's contribution to money supply growth remains elevated, and given revised budget parameters, will be larger than we previously assumed. If under these conditions credit growth continues at such a high pace, this may require tighter policy than envisioned in the baseline scenario.

The combined impact through budget and credit channels has already pushed money supply growth to the upper bound of our expectations, or even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightness than was assumed in our April forecast.

Now on to external conditions. The situation in the Middle East has led to rising commodity prices. These changes have already begun translating into accelerating inflation in many countries. A number of central banks responded to rising inflationary risks by raising rates. Global growth expectations are declining.

For the Russian economy, disinflationary effects have prevailed so far. Higher commodity prices have led to increased export revenue and ruble appreciation. Import demand has also grown, but not as significantly as export volumes. Risks of a prolonged Middle Eastern conflict have decreased, but uncertainty remains about the scale of its inflationary consequences for the global economy, which could affect Russia through import prices and logistics costs.

Turning to risks in general: our assessment is that the balance has shifted more toward inflationary risks. Regarding the risk of revising budget policy parameters, it is essentially already materializing, but uncertainty about its scale remains. Budget and monetary policy simultaneously affect aggregate demand. If the contribution of budget policy grows to achieve priority objectives, monetary policy must play a stabilizing role — its tightness must adjust to partially reduce the credit contribution to aggregate demand. Only in this way can we prevent aggregate demand from overshooting the economy's capacity to increase supply, which would trigger another round of inflation.

Risks from labor shortages and inflationary expectations persist. Inflationary risks related to temporary supply reductions in certain sectors have risen. As for risks linked to external conditions, I have already spoken about them. A disinflationary risk remains lower-than-expected domestic demand growth.

Finally, on our future decisions. Current price growth has slowed noticeably, but we see rising risks that could lead to accelerating inflation ahead. Particularly important for us are those risks that may sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags, so our decisions must be forward-looking. I want to emphasize that neither further key rate cuts nor the size of the step at any particular meeting are predetermined. We may need pauses to assess all incoming information and the effects of our previous decisions. Only by maintaining a balanced approach, especially amid high uncertainty, can we achieve a lasting result and stabilize inflation at a low level. Thank you for your attention.

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Moderator5:54:20

Thank you, colleagues. Please ask your questions, and don't forget to introduce yourselves and name your publication. Masha, please. First row.

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Maria Stepanova5:54:30

Hello, Informagent Stas, Maria Stepanova. What options were considered today? You already said further steps are not predetermined, but has the probability increased that you would again use 25 basis points? Thank you.

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Elvira Nabiullina5:54:47

Thank you. A traditional question for us — yes, three rate options were very thoroughly considered this time: keeping 14.5%, cutting to 14.25%, and cutting to exactly 14. Incidentally, all of these options appeared in economists' questions. There were weighty arguments for each, and a considerable number of discussion participants spoke in favor of each. In my view, the final decision is indeed a balanced consideration of all arguments, including from the perspective of the cost of error.

To generalize, positions of discussion participants differed along three main parameters. First was the assessment of how sustainable the observed indicators of underlying inflation have been in recent months. Second was the assessment of the scale of additional inflationary factors that have emerged since the last board meeting — from the demand side, the shift in budget plans for 2026 and subsequent years, and from the supply side, the temporary reduction in fuel production. The third parameter was the assessment of the degree of tightness of monetary conditions, which is important given the significant acceleration in credit growth over the past 2–3 months. And practically all participants noted that room for further rate cuts has narrowed, but the extent of that narrowing was — and likely will continue to be — a subject of discussion at the next meeting.

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Anastasia Saveleva5:57:01

Anastasia Saveleva, Interfax. You already said room for further rate cuts has narrowed. Could you say how much the budget factor influenced this? And do you see risks that this room could shrink further due to the situation on the fuel market, which could have secondary effects — price increases for other goods such as food — and lead to rising inflationary expectations?

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Elvira Nabiullina5:57:35

We overall assess a reduction in room for cutting the key rate. This will be discussed concretely at the next meeting. It is a structural meeting, but the factors influencing this — their specific magnitude is hard to measure. We do note that inflationary factors have strengthened their impact.

But we note that pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it's very important how the situation develops and whether these one-off factors can transition into sustained price pressure, primarily through rising inflation expectations. Clearly, gasoline is a marker good. In the June surveys, this effect isn't present yet. We will look at the July surveys on inflation expectations, which will be released before the next meeting. It will be important to see how this affects overall costs across a wide range of goods. These are the factors that need to be assessed. I'll say again that this was indeed one of the main factors in the balanced decision to reduce the rate cut step.

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Moderator5:58:52

Colleagues, please. Pavel, go ahead.

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Pavel5:58:58

Thank you. In the press release you noted that a higher key rate trajectory may be needed. Does this apply to 2028? Thank you.

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Elvira Nabiullina5:59:13

We will provide our new vision of the key rate trajectory, as I said, at the anchor meeting, and assess what trajectory may be needed for 2026, 2027, and 2028. Most likely, changes will mainly affect 2026-2027, but this still needs to be reviewed and calculated. Yes, please, Alexey Borisovich.

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Alexey Borisovich5:59:37

Without preempting the July meeting, since the entire forecast is influenced by all factors, not just those that have changed to date. But we must proceed from the assumption that if in 2028 budget policy is still not in the mode of a zero structural primary deficit, this would mean that monetary policy will most likely not be fully neutral in 2028, because it would need to compensate for this. Again, all else being equal. We will assess the neutral rate level as we do annually before presenting the main directions of monetary policy. So indeed, specific numbers cannot be said right now, but by the next meeting, I think there will be more clarity.

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Moderator6:00:45

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov6:00:49

Good day. Mitrofanov Nikita, Telegram channel Economical. I continue to develop my macroeconomic model that tries to predict your decision. Today the model predicted a 70% probability you would cut the key rate by 0.5% and a 30% probability by 0.25%. The model's decision was based mainly on calculated inflation data. My calculated data was even worse than yours in the press release. Reality turned out better, so for my model it seemed more likely to cut by 0.5%. But along with that, I wanted to clarify the following. The 30% probability was because we still have high public inflation expectations, low unemployment, and a new factor emerged — the structural deficit of the Russian Federation budget. In this context, I'd like to ask: what influence does monetary policy and its tightness have on the growth of money supply from the budget channel, since this is a factor, but it's starting to seem that monetary policy decisions primarily affect the private sector and to a lesser degree the budget channel. Thank you.

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Elvira Nabiullina6:02:18

Naturally, our decisions primarily affect the rate of growth of lending, market lending above all. That's why we always say the share of subsidized loans is important for us, because subsidized loans in general are not sensitive to our rate decisions. We clearly affect private credit more. Our monetary policy does affect the budget because the budget has internal debt and debt servicing costs. Plus the subsidized programs where the budget took on a significant portion of interest rate risk. But overall, monetary policy does not exert a direct influence on the budget channel. Rather, it's the reverse — there are budget decisions being prepared by the government and adopted by the Duma to fulfill priority tasks. And in a situation where resources are fully occupied, the central bank plays a compensating role. We must, taking as given the money flowing through the budget channel, adapt our monetary policy so that through the private credit channel the right amount of money flows into the economy to prevent inflation from accelerating. The difficulty is that our decisions operate with a lag. Today's decisions will be reflected over three to six quarters. That's why we say we need earlier predictability of budget policy. There is an interconnection, but we act here as a stabilizer.

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Moderator6:04:19

Thank you. The next question online is from Sergey Enkvist, publication NGS55, Omsk. Has the Central Bank revised its key rate forecast after statements at the St. Petersburg International Economic Forum that the rate should become single-digit by year-end?

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Elvira Nabiullina6:04:40

No. First, I'll remind you that we haven't revised the key rate forecast right now. We revise it at anchor rate meetings. The next one will be in July when we broadly revise the forecast, because the rate forecast depends on how we revise our vision of future developments. As for a single-digit rate level, our April forecast did not assume a key rate drop below 10% this year. I said that pro-inflationary risks have even grown, and if the key rate trajectory forecast is revised, it would more likely be upward, not downward. The room for rate cuts by year-end and possibly next year — the question about 2028 was also asked — has most likely shrunk. Not because we believe additional cooling of aggregate demand is needed, but because government demand will contribute more to demand and GDP growth in 2026 and 2027. The private sector's contribution should be more restrained; otherwise, there won't be additional GDP growth — all this demand stimulation will just accelerate inflation again. We must not allow this because everyone loses: the public and businesses. Even those now asking for faster rate cuts would face rising costs. With accelerating inflation, market rates won't fall — they'll rise. Our task is to prevent this situation. Of course, we listen to and hear business experts, including the arguments made at the forum, and include them in the list of considerations discussed at the board of directors. But decisions are based on independent analysis of data. We analyze a large amount of data — not only statistical and current data, but also the medium-term forecast accounting for monetary policy lags.

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Moderator6:07:27

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov6:07:33

Evgeny Grachov, Izvestia newspaper. In conditions where representatives of various agencies and businesses increasingly speak of the need for more active key rate cuts, does the Bank of Russia face additional pressure on monetary policy matters? And have regulators started to account for a wider range of economic indicators in decision-making, in particular those related to increased business risks? Thank you.

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Elvira Nabiullina6:07:59

I've already said we certainly take into account the views of experts and business, and there are many voices for cutting the rate. They are quite understandable — many not only from agencies but also from businesses. But we don't perceive this as pressure. I've said this repeatedly, and decisions are made independently based on our own analysis. We have always considered and continue to consider a wide range of indicators — not only inflation and inflation expectations, but also the labor market, economic activity, broken down by industry and region. We pay particular attention to business surveys. Our regular monitoring of 15,000 enterprises — results are available. There's a lot of interesting data. We also hold meetings with business. It's a wide range of indicators. Sometimes I hear a simplified view, for example about the labor market, that the Bank of Russia reduces everything to unemployment. This is absolutely not the case. In my speeches and those of my colleagues, we constantly emphasize that we look at many data points characterizing the labor market situation — temporary employment, downtime, resumes, vacancies, wage growth rates relative to productivity, by industry and region. For each direction, it's a large list of data we use. Your question is truly correct, because decision-making requires using the full complex of data characterizing the economic situation.

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Moderator6:09:55

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna6:10:01

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I can't help but ask — your prolonged absence spawned many rumors about personnel changes, about you wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina6:10:18

I can only confirm that I indeed had a cold and lost my voice for some time. The only thing I can say is to thank those who sincerely worried about my health.

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Moderator6:10:33

Colleagues, please. Georgy.

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Georgy Nedogibchenko6:10:38

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of and participating in discussions on tightening budget rule parameters for 2027, with the cutoff price reduced to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina6:10:57

Our position hasn't changed. First, we believe the budget rule is a fundamental foundation of macroeconomic stability. The current base price is somewhat high from the perspective of a conservative assessment of long-term oil market trends. In our view, it should be reduced to ensure long-term fiscal stability, state financial stability, macroeconomic stability. Of course, the specific cutoff level will be proposed by the government. But it should be said that with a lower base price for the budget rule, monetary policy will provide greater foundations for macroeconomic stability. Monetary policy will take this into account when discussing our decision. Alexey Borisovich, we have a good understanding of this discussion in terms of making the current monetary policy decision while understanding what will happen with the budget rule in 2027.

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Moderator6:12:12

Thank you. Colleagues, please. Yulia.

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Yulia Rostorgoeva6:12:17

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, if we believe US authorities' statements, is over. Oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and economy in general in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina6:12:40

When you talk about risks to the balance of payments from the end of the conflict, you probably mean that oil prices could start falling. But these risks are neutralized or compensated by budget rule actions, which we discussed. So we don't see significant risks from this perspective. As for the overall impact, it's probably still difficult to assess in general, because evaluating the consequences of the conflict — even if it's finally ended — on the world economy and world inflation is premature. We see it has already affected price growth and economic dynamics in many countries, which could also affect the Russian economy through future demand for our goods. So far, the crisis has a disinflationary impact because exporters' revenue grew and the ruble strengthened. But there are also pro-inflationary effects — rising logistics costs for our businesses and rising import prices. Pro-inflationary risks exist. But we said the longer the conflict continues, the greater the pro-inflationary risks. We now consider that if the conflict is ending, these risks are diminishing from this side compared to what we previously thought.

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Moderator6:14:18

Thank you. The next question online is from Marina Ukhapova, Nizhegorodskaya Pravda newspaper, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova6:14:28

Hello. The trend of key rate cuts has been ongoing for a year. What effect has this had on the credit market? Maybe more accessible business loans, mortgage availability, new credit offerings?

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Elvira Nabiullina6:14:45

Yes, the key rate reduction has led to increased lending. We see this in market lending segments. For example, in the four months January-April, almost four times more market mortgage loans were issued than in the same period last year. In corporate lending, non-subsidized lending volumes have also grown. And from our regular business surveys, we see businesses less frequently naming lack of working capital financing as a key difficulty. Specifically, the share of such enterprises has dropped to 10% — almost 1.5 times less than before we started cutting rates. We now see that the rate increase and high rates of a year ago were a bitter but absolutely necessary medicine. A year ago, the key business concern in the same surveys was rising costs — essentially inflationary risks. Nearly every fourth company we surveyed complained about this. The intensity of cost concerns has decreased, not disappeared, but decreased. Now one in five companies reports this. It's a direct consequence of inflation reduction through tight monetary policy.

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Moderator6:16:41

Colleagues, please. Zulfia, I see your hand.

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Zulfia Khamitova6:16:47

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary GDP assessment since the beginning of the year? Do you see risks of economic overcooling, and what key rate is needed in Russia for economic activity to grow at higher rates? Thank you.

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Elvira Nabiullina6:17:02

By our estimates, the economy continued moderate growth in the first half overall. For the first quarter, you know Rosstat's estimate — GDP decreased by 0.2%, but we said this was largely due to seasonal and calendar factors. April brought GDP back into positive territory. Overall, we assess January-April growth at 0.3%. For the half-year, we expect around half a percentage point. According to operational data, business activity across the country continued growing in May. I already mentioned we see acceleration in consumer activity. We don't see risks of economic overcooling. The main overcooling markers we use — and most economists use them everywhere — are inflation falling well below target, rising unemployment, and declining real incomes. None of these markers are present. And a balanced monetary policy helps protect the economy from this situation. As for your question about what rate level is needed for high growth — for sustainable high growth, it's not about the rate level. What's needed are mechanisms and institutions that stimulate the development of production capabilities and increase labor productivity. This is primarily determined by the efficiency of production factor utilization.

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Moderator6:19:02

Colleagues, please. Artem.

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Artem Gorun6:19:08

Good day. Gorun Artem, Investfuture. My question is about the labor market, which we've already touched on. We see unemployment remains near historic lows, but the picture is contradictory — large companies continue cutting staff. Meanwhile, the Ministry of Labor estimates that about 7.5% of work functions could be replaced by artificial intelligence in the near future. There seem to be contradictions. How do you assess these changes? Does this show that labor market tension is beginning to ease — the one you've been waiting for and calling one of the main factors? And how might this affect your overall assessment and possible rate decisions? Thank you.

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Elvira Nabiullina6:19:54

Indeed, there are certain signs of cooling in the labor market, but I noted that the pace of tension reduction is slowing. From surveys, in recent months the share of enterprises experiencing labor shortages hasn't declined for the past couple of months. There is attention on some workforce release and idle time at some enterprises. These cases attract attention, but the national scale is still small and not growing. By our estimates, it's about 0.3% of all employed. So there are reductions, but unemployment isn't growing, which shows that if there were cuts at some companies, workers are finding jobs at others. Regarding artificial intelligence, we don't yet see a macroeconomic effect on the labor market. It doesn't play a determining role yet — for some companies it increases labor productivity, those that skillfully use AI. But this factor's influence will grow over years. Most importantly, I want to emphasize that the labor market is an important factor in rate decisions, but not the only one. We consider the full set of factors affecting the economy and inflation.

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Moderator6:21:45

Marina, yes, please.

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Marina Piminova6:21:49

Marina Piminova, NTV, Business News. Continuing the topic of business pressure and a bit about sports. The FIFA World Cup is underway. In football, there's a concept of an own goal. Why can't the Central Bank convince businesses and many financially literate people that it's not scoring an own goal against the Russian economy? Thank you.

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Elvira Nabiullina6:22:13

Yes, you know, we certainly see ourselves more as the goalkeeper defending against inflation. And probably many matches are decided by the reliability of goalkeepers. Someone has to hold and protect those goalposts. Alexey Borisovich, anything to add?

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Alexey Borisovich6:22:41

I can only recall the Russia-Iran match in 2018. Its result was decided in penalties thanks to the reliability of our goalkeeper.

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Moderator6:23:01

Colleagues, please. Nastya, second row.

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Anastasia Bashkatova6:23:06

Hello, thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank present as convincing proof of its monetary policy's effectiveness to the public? And secondly, given that achieving the 4% inflation target still poses difficulties, how does the Central Bank view proposals from some experts to calculate and account in monetary policy not the usual overall consumer inflation, but a different inflation cleaned of the influence of factors that have strongly changed the economic situation since 2022, in particular the special military operation factor in all its manifestations or the factor of tighter sanctions, etc.? Thank you.

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Elvira Nabiullina6:23:55

Thank you. You're absolutely right about convincing indicators. The criterion of truth, as they say, is fact. So let's look at facts, including annual inflation. Year-on-year inflation over the last year has halved. This didn't happen by itself — it wasn't a lucky coincidence. The circumstances were actually playing in the opposite direction, with pro-inflationary risks materializing. And this is primarily the result of monetary policy. But you're right that this effect is sometimes doubted. Perhaps someone forgets that the rate works with a lag. When rates are high and inflation is high, we start cutting rates and inflation falls. But we need to remember: when we raised rates, the effect operates over three to six quarters. The fact that inflation has slowed is of course due to the high rates we maintained for an extended period, starting from 21%. If it were otherwise — we held 21% for a long enough period, let's admit, from October 2024 through summer last year — inflation started declining. The logic that raising rates increases inflation doesn't withstand criticism. When we raised rates, inflation began declining after peaking last spring. And seeing sustained inflation deceleration, we are cutting rates. Now the important question: many experts propose we not target overall inflation indicators but target underlying inflation, cleaned of everything that's rising, and say 'this is what's left that isn't rising, then cut rates.' You can clean inflation any way you like. We actually show inflation figures cleaned of utility tariff growth, tourism services, etc. But interest rates won't be lower because of that. If overall inflation is 10%, and your cleaned inflation is 2%, credit rates won't be 2% — they'll be above 10% anyway. So if we want more moderate rates, we need to reduce overall inflation. For people, it doesn't matter why inflation is high — their purchasing power depends on overall price increases across everything. So while we can look at various cleanings analytically, the target must be reducing overall inflation and price pressure.

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Alexey Borisovich6:27:14

And clearly, monetary policy cannot influence the root causes of inflation linked to supply-side changes. But what it can do is bring demand into alignment with these circumstances, and then inflation will be low and rates moderate.

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Moderator6:27:38

Colleagues, please. Dmitry.

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Dmitry Maroko6:27:42

Dmitry Maroko, Rossiya 24. This week the court rejected Euroclear's petition to suspend enforcement proceedings on the Central Bank's claim. What does this mean in practice? Does this bring us closer to returning frozen assets? Thank you.

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Elvira Nabiullina6:27:58

Here I can probably only repeat the general formula, because we don't disclose details. I'll confirm again — we don't disclose details, don't disclose tactics. We will take all measures and use all legal means to protect our legitimate rights.

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Moderator6:28:18

Colleagues, please. Yakov.

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Yakov Timakov6:28:23

Good day. Yakov Timakov, Expert magazine. Alexey Borisovich, not so long ago, the comparison of Nabiullina with Paul Volcker was made. The Fed chairman in the 1970s-80s, Paul Volcker, was a proponent of tight monetary policy, the result of which was sustained low inflation on one hand and recession on the other. I'm intentionally not drawing direct parallels, since the Central Bank's arguments about sectoral decline sound convincing and not everyone agrees with the recession thesis. My question is not about the current situation but about long-term consequences. After the Volcker shock in the US came Reaganomics — tax cuts, deregulation. The government is taking necessary measures, but supply recovery may take time. Rising gasoline prices could also affect inflation expectations, as it's a sensitive good for both people and companies. Additionally, in recent weeks we've seen a reversal in agricultural product prices after an unusually strong decline in spring — we already see this in operational data. And to conclude on inflation, I'd like to draw attention to a statistical effect that will affect annual inflation figures in coming months. In July, there will be no utility tariff increase as last year — the indexation has been moved to October. This means annual inflation may temporarily decline slightly due to this factor, but it will only be redistribution of price growth within the year.

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Elvira Nabiullina6:29:40

Thank you. So, on inflation. Current price growth rates have notably slowed, but we observe rising risks that could lead to inflation acceleration in the future. Especially important are those that could sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags, so our decisions must be forward-looking. I'll emphasize that neither further key rate cuts nor the size of the step at each specific meeting are predetermined. We may need pauses to assess all incoming information and the effect of previous decisions. Only maintaining a balanced approach, especially amid high uncertainty, will allow achieving sustainable results and stabilizing inflation at a low level. Second, the economy. According to operational data, in Q2 2026, as we expected, economic activity indicators are improving. Temporary factors that restrained it at the start of the year, including calendar and weather factors, have been exhausted or reversed. In particular, there's some recovery after the cold and snowy winter in construction, which was the main source of the GDP decline in Q1. Overall, the first half corresponds to moderate output growth. At the same time, the situation varies greatly across sectors, and this heterogeneity has grown over the past year, largely due to structural restructuring. If government demand accelerates substantially, the room for private demand expansion becomes smaller. Certain contribution to sectoral heterogeneity comes from shorter-term factors like global commodity market conditions and temporary removal of some processing capacity. Consumer activity's moderate growth persists — spring saw active car purchases. Demand remains high in services. Consumption is supported by wage growth, though it has somewhat slowed, with enterprises planning more moderate indexations going forward. High dispersion in wage dynamics across industries reflects economic heterogeneity. Labor market tension is easing slowly. In some regions, deficit reduction has stalled. For sustainable reduction in cost and price pressure, further convergence of wage growth and productivity is needed. I want to emphasize: to increase productivity, workers need to be maximally engaged where they deliver greatest economic returns. Third, monetary conditions. Interest rates in most financial market segments continued to decline smoothly. Long-term OFZ yields slightly rose, reflecting a premium for term related to fiscal policy uncertainty. Most loans, especially to large and medium enterprises, are now issued at floating rates — key rate cuts translate directly into interest payment reductions for both new and existing loans. The savings rate, though slightly declining, remains high. Ruble deposits continue to grow. Savings accounts are gaining popularity, along with growing interest in financial market instruments. In April-May, retail credit growth accelerated significantly. Corporate credit growth rates increased substantially. The dynamics of monetary indicators require special attention. First, if the credit acceleration proves sustained rather than a short-term surge, current monetary conditions may no longer be perceived as restrictive by borrowers. Second, the budget policy's contribution to money supply growth remains elevated and will be greater than previously assumed. If credit growth continues at high rates, this may require tighter policy than our April forecast. The combined budget and credit channel effect has already led money supply growth to the upper bound of expectations. Given our decisions affect the economy with lags, this already requires greater tightness than in our April forecast. Now on external conditions. The Middle East situation drove commodity price rises, which are translating into faster inflation in many countries. Several central banks responded with rate hikes. World economic growth expectations are declining. For Russia, disinflationary effects have dominated. Higher commodity prices boosted export revenue and strengthened the ruble. Import demand also grew but less than export value. Risks of prolonged Middle East conflict have declined, but uncertainty remains about its pro-inflationary consequences for the world economy, which could affect Russia through import prices and logistics costs. On risks overall: our assessment shows the balance has shifted more toward pro-inflationary. The risk of budget policy parameter review is essentially already materializing, with uncertainty about its scale remaining. Fiscal and monetary policy simultaneously affect demand. If the fiscal contribution grows for priority tasks, monetary policy must play a stabilizer role, adjusting its tightness to somewhat reduce credit's contribution to aggregate demand. Only this way can demand deviations upward from supply expansion capabilities be avoided, preventing another inflation wave. Risks persist from labor shortages, inflation expectations, and pro-inflationary risks from temporary supply reductions in individual sectors. The disinflationary risk remains lower domestic demand dynamics than our baseline estimates.

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Moderator6:38:23

Thank you, colleagues. Please, your questions — and don't forget to introduce yourselves and name your publication. Masha, please. First row.

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Maria Stepanova6:38:33

Good day, Information Agency Maria Stepanova. What options were considered today? You already said future steps are not predetermined, but has the probability increased that you would again use 0.25? Thank you.

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Elvira Nabiullina6:38:50

Thank you. A traditional question for us. This time, three rate options were very specifically considered: leaving it at 14.5%, 14.25%, and cutting to 14% exactly. Incidentally, all these options featured in economists' questions. Each option had weighty arguments, and a significant number of discussion participants spoke for each. In my view, the final result was indeed a balanced consideration of all arguments, including from the perspective of error cost. To summarize, participants' positions differed on three main parameters. First, the assessment of how sustainable the recent underlying inflation indicators are — I said 'sustainable' twice, but we have underlying inflation indicators and need to understand how truly sustainable they are. Second, the assessment of additional pro-inflationary factors that emerged since the last board meeting — on the demand side, this is the shift in budget plans for 2026 and subsequent years; on the supply constraint side, including the temporary reduction in fuel production. Third, the assessment of the degree of monetary conditions tightness — this is important given the significant acceleration of credit growth in the past 2-3 months. All participants noted that room for further rate cuts has narrowed. But how much it has narrowed was and apparently will be the subject of discussion at the next meeting.

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Moderator6:40:58

Thank you. Nastya.

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Anastasia Saveleva6:41:04

Thank you. Saveleva Anastasia, Interfax. You already said room for further rate cuts has narrowed. Could you say how much the budget factor influenced this? And do you see risks that this room could shrink further due to the fuel market situation, which could have secondary effects — rising prices for other goods, such as food — and lead to rising inflation expectations?

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Elvira Nabiullina6:41:38

We generally assess a reduction in room for cutting the key rate. This will be specifically discussed at the next meeting, which is an anchor meeting. The factors affecting this and their specific magnitudes are hard to measure, but we note that pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it's very important how the situation develops and whether these one-off factors can transition into sustained price pressure, primarily through rising inflation expectations. Clearly, gasoline is a marker good. In June surveys, this effect isn't present yet. We'll look at July surveys on inflation expectations, released before the next meeting. It will be important to see how this affects overall costs across a wide range of goods. These are factors that need to be assessed. I'll say again that this was indeed one of the main factors in the balanced decision to reduce the rate cut step.

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Moderator6:42:55

Colleagues, please. Pavel.

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Pavel6:43:00

Thank you. In the press release you noted that a higher key rate trajectory may be needed. Does this apply to 2028? Thank you.

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Elvira Nabiullina6:43:16

We will provide our new vision of the key rate trajectory, as I said, at the anchor meeting, and assess what trajectory may be needed for 2026, 2027, and 2028. Most likely, changes will mainly affect 2026-2027, but this still needs to be reviewed and calculated. Yes, please, Alexey Borisovich.

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Alexey Borisovich6:43:40

Without preempting the July meeting, since the entire forecast is influenced by all factors, not just those that have changed to date. But we must proceed from the assumption that if in 2028 budget policy is still not in the mode of a zero structural primary deficit, this would mean monetary policy will most likely not be fully neutral in 2028, because it would need to compensate for this. Again, all else being equal. We will assess the neutral rate level as we do annually before presenting the main directions of monetary policy. So specific numbers can't be said now, but by the next meeting there should be more clarity.

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Moderator6:44:48

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov6:44:52

Good day. Mitrofanov Nikita, Telegram channel Economic. I continue developing my macroeconomic model. Today it predicted a 70% probability you'd cut the key rate by 0.5% and 30% by 0.25%. The model's decision was based on calculated inflation data, and my data was even worse than yours in the press release. Reality turned out better, so for my model it seemed more likely to cut by 0.5%. But I wanted to clarify: the 30% probability was because we still have high public inflation expectations, low unemployment, and a new factor emerged — the structural deficit of the Russian Federation budget. In this context, what influence does monetary policy tightness have on the growth of money supply from the budget channel, since it's starting to seem that monetary policy primarily affects the private sector and less the budget channel? Thank you.

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Elvira Nabiullina6:46:21

Naturally, our decisions primarily affect the growth rate of lending, market lending above all. That's why we say the share of subsidized loans is important, because they are generally not sensitive to our rate decisions. We clearly affect private credit more. Our monetary policy does affect the budget because the budget has internal debt and servicing costs, plus subsidized programs where the budget took on significant interest rate risk. But overall, monetary policy doesn't exert a direct influence on the budget channel. Rather, there are budget decisions being prepared by the government and adopted by the Duma for priority tasks. In situations where resources are fully occupied, the central bank plays a compensating role — we must adapt monetary policy so that through private credit the right amount of money flows into the economy to prevent inflation from accelerating. The difficulty is that our decisions operate with a lag of three to six quarters. That's why earlier predictability of budget policy is important. There is an interconnection, but we act here as a stabilizer.

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Moderator6:48:22

Thank you. The next question online from Sergey Enkvist, NGS55, Omsk. Has the Central Bank revised its key rate forecast after statements at the St. Petersburg International Economic Forum that the rate should become single-digit by year-end?

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Elvira Nabiullina6:48:43

No.

Well, first of all, I'll remind you that we have not revised our key rate forecast. We revise it at our landmark rate-setting meetings. The next one will be in July, when we generally review the forecast, because the rate forecast depends on how we revise the overall forecast, how our view of future developments changes. As for single-digit rate levels, our April forecast did not envisage reducing the key rate to single-digit levels, that is, below 10%, this year. I said that inflation risks have even increased, and if the key rate trajectory forecast is revised, it would be more likely upward rather than downward. And the room for reducing the key rate by the end of this year and perhaps into next year — the question about 2028 was also raised — has most likely shrunk. And not because we think additional cooling of aggregate demand is needed, but because — I'll emphasize — aggregate demand. We do not think aggregate demand should cool further, but because government demand will make a larger contribution to both demand and GDP growth in 2026 and 2027, which means the private sector's contribution must be more restrained. Otherwise, no additional GDP growth will occur, and all this demand stimulus will once again translate into accelerating inflation. We must not allow this, because everyone will lose from it — both the population and business. Even those currently asking for faster rate cuts will face rising costs. And with accelerating inflation, market rates will not fall — they will rise. Therefore, our task is to prevent this situation. We certainly listen to business experts, their arguments, including those voiced at the forum, and include them in the list of views we discuss with colleagues at the board of directors. But decisions are made based on our own independent analysis of data. We analyze a large amount of data, not only statistical and not only current data — I'll emphasize again — but also medium-term projections of how the situation will develop, taking into account the lags of monetary policy.

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Moderator6:51:30

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov6:51:36

Evgeny Grachov, Izvestia newspaper. Tell me, in conditions where representatives of various agencies and business increasingly speak about the need for more active key rate cuts, is the Bank of Russia experiencing additional pressure on monetary policy issues? And have regulators, against the backdrop of these discussions, recently begun to take into account a broader spectrum of economic indicators when making decisions, particularly those related to increased risks for business? Thank you.

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Elvira Nabiullina6:52:02

Well, I already said that we certainly take into account the opinions of experts and business. There are many voices calling for rate cuts. They are quite understandable. Indeed, there are many of them not only from agencies but also from the business side. But we do not perceive this as pressure. I have said this repeatedly, and decisions are made independently based on our own analysis. We have always taken into account and continue to take into account a wide range of indicators — not only inflation and inflation expectations, but also the labor market and economic activity, including by sector and region. We pay particular attention to business surveys. I'll remind you about our regular monitoring of 15,000 enterprises. Its results are quite available for review, and there is a lot of interesting information. Of course, we conduct meetings with business. Once again, we discuss a wide range of indicators. Sometimes we hear a somewhat simplified notion — for example, about the labor market, that the Bank of Russia reduces everything to unemployment. That is absolutely not so. In my speeches and those of my colleagues, we constantly emphasize that we look at a large amount of data characterizing the labor market situation and the situation with temporary employment, with downtime, resumes, vacancies, wage growth rates, how this relates to productivity, by sector and region. Therefore, for each area, there is a large list of data that we use. And your question is indeed correct, because when making decisions, one needs to use the full range of data characterizing the economic situation.

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Moderator6:53:59

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna6:54:04

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I cannot help but ask — your prolonged absence gave rise to numerous rumors about personnel changes, about you wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina6:54:21

I can only confirm that I indeed had a cold and lost my voice for some time. And the only thing I can say is to thank those who sincerely worried about my health.

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Moderator6:54:36

Colleagues, please, Georgy.

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Georgy Nedogibchenko6:54:41

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of any discussions about tightening budget rule parameters for 2027, with the cutoff price lowered to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina6:55:01

Well, our position here has not changed. First, we consider the budget rule to be a fundamental foundation for macroeconomic stability. The current base price is somewhat high from the perspective of conservative estimates of long-term oil market trends. In our view, it should be lowered to ensure long-term fiscal stability of government finances and macroeconomic stability. Of course, the government will propose the specific cutoff level. But it should be said that with a lower base price for the budget rule, monetary policy will have a stronger foundation for macroeconomic stability. Monetary policy will take this into account when we discuss our decision. Alexey Borisovich, we have a good understanding of the progress of this discussion regarding monetary policy decisions, taking into account what will happen with the budget rule in 2027. Thank you.

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Moderator6:56:16

Colleagues, please, Yulia.

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Yulia Rostorgoeva6:56:20

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, according to US authorities' statements, is over. Oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and the economy as a whole in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina6:56:43

But when you talk about balance of payment risks from the end of the conflict, you probably mean that oil prices may start declining. But these risks are actually neutralized or compensated by the budget rule, which we discussed. Therefore, we don't see any significant risks from this perspective. As for the overall impact, it is still difficult to assess the aggregate impact, because evaluating the consequences of the conflict for the global economy and global inflation, even if it is finally concluded, is premature. We see that in many countries it has already affected price growth and economic dynamics, and this too will affect the Russian economy through future demand for our products. So far, the crisis has had a disinflationary impact because exporters' revenue grew and the exchange rate strengthened. But there are also inflationary effects — rising logistics costs for our businesses and rising import prices. So inflationary risks exist as well. But we said that the longer the conflict continues, the greater the inflationary risks. And now we believe that if the conflict ends, inflationary risks from that side decrease compared to what we previously thought.

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Moderator6:58:22

Thank you. And the next question online is from Marina Ukhapova, Nizhny Novgorodskaya Pravda newspaper, Nizhny Novgorod. Marina, please go ahead with your question.

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Marina Ukhapova6:58:31

Hello. The course toward reducing the key rate has been maintained for a year. What effect has this had on the lending market? Perhaps more accessible loans for business, mortgage affordability, some new credit offerings.

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Elvira Nabiullina6:58:48

Yes, the reduction in the key rate has led to a growth in lending. And we see this in market lending segments. For example, in four months — January through April — we issued almost four times more market-rate mortgages than in the same period last year. And in the corporate lending market, volumes of non-preferential lending have also grown. And we — I already spoke about business surveys — we regularly survey businesses and see that businesses have less frequently been citing lack of funds for working capital financing among their main current difficulties. Specifically, the share of such enterprises has fallen to 10%, which is almost one and a half times less than before we started cutting the rate. And now we actually see that the key rate increase and the high interest rates of a year ago were a bitter but absolutely necessary medicine. A year ago, according to the same surveys, the key concern for businesses was rising costs — essentially inflationary risks. Then practically every fourth company we surveyed complained about this. And now the intensity of this concern about rising costs has decreased — it hasn't disappeared, but decreased. Now one in five companies mentions it. And this is a direct consequence of the reduction in inflation resulting from tight monetary policy.

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Moderator7:00:44

Colleagues, please, Zulfia, I see your hand.

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Zulfia Khamitova7:00:50

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary assessment of GDP since the beginning of the year? Do you see risks of the economy overheating, and what key rate is needed in Russia for economic activity to grow at higher rates? Thank you.

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Elvira Nabiullina7:01:06

Well, according to our estimates, overall in the first half of the year, the economy continues to show moderate growth. For the first quarter, this is Rosstat's estimate, which you know — GDP decreased by 0.2%, but we said that this was largely due to various seasonal and calendar factors. April brought GDP back into positive territory. Overall, we estimate economic growth for January through April at 0.3%. By the end of the half-year, we expect about half a percentage point. According to operational data, overall business activity across the country is also growing in May. I already said that we see an acceleration in consumer activity. We do not see risks of economic overheating. I'll remind you that the key markers of overheating we use — and not just us, but most economists everywhere use them — are inflation falling significantly below target, rising unemployment, and falling real incomes of the population. None of these markers are present. And what helps protect the economy from overheating is balanced monetary policy. As for your question about what rate level is needed for the economy to grow at high rates — for the economy to grow sustainably at high rates, the question is not about the rate level. What's needed are mechanisms and institutions that stimulate the development of production capabilities and increase labor productivity. This is primarily determined by the efficiency of using factors of production.

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Moderator7:03:05

Colleagues, please, Artem.

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Artem Gorun7:03:11

Good day. Artem, Investferry. My question will be about the labor market, which we have already touched on. We now see unemployment remaining near historical minimums, but the picture is contradictory because large companies continue to reduce their staffs. At the same time, the Ministry of Labor estimates that around 7.5% of work functions could be replaced by artificial intelligence in the near future. There are some contradictions here. How do you assess these changes? Does this show that labor market tension is beginning to ease, which you had long awaited and called one of the main factors? And how might this affect your overall assessment and possible rate decisions? Thank you.

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Elvira Nabiullina7:03:57

Well, indeed, there are certain signs of cooling in the labor market. But I noted that we see that the pace of tension reduction is decreasing. And we see from surveys that in recent months, the share of enterprises experiencing labor shortages has not declined in the past couple of months. And indeed, attention is often drawn to some staff reductions and downtime at certain enterprises. These cases certainly attract attention, but on a national scale, the scale is still not large and not growing. According to our estimates, this is about 0.3% of all employed. So there are reductions, but the fact that unemployment is not rising shows that if there were layoffs at some companies, workers are finding jobs at other companies. As for artificial intelligence, we do not yet see a macroeconomic effect from it in terms of the labor market — it does not yet play a determining role. For individual companies it increases labor productivity if they skillfully use artificial intelligence, and the impact of this factor will likely grow over the years. But I want to emphasize more broadly that the labor market is an important factor in rate decisions, but not the only one. We take into account the full range of factors influencing the economy and inflation.

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Moderator7:05:48

Marina, yes, please go ahead.

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Marina Pimionova7:05:52

Marina Pimionova, NTV. Continuing the theme of business pressure, and a bit about sports. The World Cup is currently underway. In football, there's the concept of an own goal — scoring in your own net. Why can't the Central Bank convince business and many financially literate people that it is not kicking the ball into the Russian economy's goal? Thank you.

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Elvira Nabiullina7:06:16

Yes, you know, we actually feel more like a goalkeeper defending against inflation. And probably many matches are decided by the reliability of goalkeepers. Someone has to guard these goalposts. Alexey Borisovich, would you like to add anything?

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Alexey Borisovich7:06:44

I can only remind you of the Russia-Spain match in 2018. The result was decided in penalties thanks to the reliability of our goalkeeper.

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Moderator7:07:05

Colleagues, please, Nastya, second row.

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Anastasia Bashkatova7:07:09

Hello. Thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. Tell me, what indicator could the Central Bank now present as convincing proof to the public of the effectiveness of its monetary policy? And the second part of the question: given that achieving the 4% inflation target still poses difficulties, how does the Central Bank relate to proposals from some experts to calculate and account for monetary policy using not the usual general consumer inflation, but a different inflation cleansed of factors that have strongly changed the economic situation since 2022 — in particular, the factor of the special military operation in all its manifestations or stricter sanctions and so on? Thank you.

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Elvira Nabiullina7:07:58

Thank you. Well, you are absolutely right about convincing indicators. The criterion of truth, as we know, is fact. So let's look at the facts, including annual inflation. Annual inflation over the last year has halved. And this did not happen by itself — it wasn't a lucky coincidence of circumstances. The circumstances, on the contrary, played in the other direction, with inflationary risks materializing. And this is first and foremost the result of monetary policy. But why you are right — this effect is sometimes questioned. Possibly someone forgets that the rate works with a lag. It seems to them: when the rate is high, inflation is high; we start cutting the rate, inflation falls. But we need to understand: when we raised the rate, the effect acts over three to six quarters. And that inflation has relatively slowed today is, of course, due to the high rate we maintained for an extended time, starting from 21%. If things were different — we held the 21% rate long enough. I must acknowledge that from October 2024 to the summer of last year, inflation began declining despite the high rate. So the logic that high rates lead to rising inflation does not withstand criticism. After the rate increase, inflation began falling after peaking last March in the spring. And seeing sustained disinflation, we are cutting the rate. Now the important question — indeed, many experts propose that we not look at overall inflation indicators but at indicators of stable inflation, cleansed of everything that's rising, and then cut the rate. We can cleanse inflation however we want. We actually show inflation indicators cleansed from housing and utilities tariff growth, from tourism services, from this and that. We have many such indicators, but interest rates won't become lower because of that. If your overall inflation is 10%, and your cleansed inflation is 2%, credit rates won't be 2% — they'll still be above 10%. Therefore, if we want more moderate rates, we need to reduce overall inflation. And for people it doesn't matter what's driving inflation — their purchasing power is determined by overall price growth across everything. Then we could say, 'Well, prices didn't rise for this, but they rose for everything else.' And for people that's also very important. So in our view, analytically one can look at any cleansed indicators, but the orientation should be on reducing overall inflation and general price pressure.

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Alexey Borisovich7:11:17

Well, it's clear that monetary policy cannot influence the root causes of that inflation related to supply-side changes. But what it can do is bring demand into alignment with those circumstances, and then inflation will be low and rates will be moderate.

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Moderator7:11:41

Colleagues, please, Dmitry.

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Dmitry Maroko7:11:45

Dmitry Maroko, Russia 24. This week the court rejected Uralker's motion to suspend enforcement proceedings in the Central Bank's lawsuit. What does this mean in practice? Does it bring us closer to the return of frozen assets? Thank you.

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Elvira Nabiullina7:12:01

Well, I can probably only repeat the general formula here, because we do not disclose details. Once again, I confirm we don't disclose details, we don't disclose tactics, but we will take all measures and use all legal means to protect our legitimate rights.

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Moderator7:12:22

Colleagues, please, Yakov.

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Yakov Timakov7:12:26

Good day. Yakov Timakov, Expert magazine. Elvira Nabiullina, Alexey Borisovich. Not long ago, Nabiullina and Kostin were compared to Paul Volcker. And the Fed Chairman in the 70s-80s, Paul Volcker, was, as we know, a proponent of tight monetary policy, which resulted in sustained low inflation on one hand and recession on the other. I'm not drawing direct parallels now, since the Central Bank's arguments about sectoral contraction sound convincing, and not everyone agrees with the thesis of recession in the Russian economy. And my question is not about the current situation but about long-term consequences. After the Volcker shock in the US came no less famous Reaganomics, expressed in tax cuts, deregulation, and strengthening of fuel. The government is taking necessary measures, but restoring supply may take time. And rising gasoline prices could also affect inflation expectations, since it is a fairly sensitive product for both people and companies. Additionally, in recent weeks there has been a reversal in fruit and vegetable prices after an atypically strong decline in the spring. We already see this in operational data.

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Elvira Nabiullina7:13:43

And finishing on the inflation topic, I want to draw attention to a statistical effect that will impact annual inflation figures in the coming months. In July there will be no increase in housing and utilities tariffs, as last year's indexing has been moved to October. This means annual inflation may temporarily decline slightly due to this factor, but this will only be a redistribution of price growth within the year. Second, on the economy. According to operational data, in the second quarter of 2026, as we expected, economic activity indicators are improving. Temporary factors that constrained it at the start of the year, including calendar and weather factors, have been exhausted or reversed. In particular, there is a certain revival in construction after a cold and snowy winter, which was the main source of the GDP decline in the first quarter. If we analyze overall economic dynamics for the first half of the year, it corresponds to moderate growth in the production of goods and services. At the same time, the situation by sector varies greatly, and this heterogeneity has grown over the past year. This is largely due to structural restructuring of the economy. If government demand accelerates significantly, the room for expanding private demand — both investment and consumption — in conditions of limited resources becomes smaller. A certain contribution to strengthening sectoral heterogeneity is made by more short-term factors, such as global commodity market conditions and temporary shutdown of certain production capacities. As for consumer activity, its moderate growth continues. In the spring months, car purchases picked up. Demand remains high in the services segment. Consumer demand is supported by wage growth, which has somewhat slowed, and enterprises are planning more moderate indexations going forward. There is also considerable variation in wage dynamics by sector and type of activity, reflecting the economic heterogeneity I mentioned. Overall, labor market tension is declining slowly. According to our regional offices, in a number of regions the reduction in labor shortages has stalled in recent months. Under these conditions, for sustained reduction in cost and price pressure, further convergence of wage growth and productivity is needed. And I want to emphasize that to increase productivity, first and foremost, labor needs to be maximally utilized where it brings the greatest economic return. Third, on monetary conditions. Interest rates in most financial market segments continued to decline smoothly under the influence of previous monetary policy decisions. At the same time, long-term OFZ yields rose somewhat, reflecting a growing term premium related to uncertainty about fiscal policy. I want to note that most loans to companies, especially large and medium ones, are now issued at floating rates, and for such loans, a reduction in the key rate translates into reduced interest payments immediately and in full, not only for newly issued loans but also existing ones. The savings rate, although declining slightly, remains quite high. Ruble funds in banks continue to grow. Among banking products, savings accounts are growing in popularity, and citizens' interest in financial market instruments and non-financial instruments continues to increase. In April-May, retail lending growth accelerated noticeably, with unsecured and auto lending, as well as market-rate mortgages, picking up. Corporate loan growth rates have increased significantly. The dynamics of monetary indicators now require special attention from us. First, if the lending acceleration proves to be a sustained trend rather than a temporary spike after low values at the start of the year, this may indicate that current monetary conditions are no longer perceived by borrowers as restrictive. Second, the contribution of fiscal policy to money supply growth remains elevated, and with the budget parameter revision, it will be even greater than we previously assumed. If lending growth continues at these high rates under these conditions, it may require tighter policy than envisaged in our baseline scenario. The combined impact through the budget and credit channels has already led to money supply growth running at the upper bound of our expectations and even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightness than was incorporated in our April forecast.

Now on external conditions. The situation in the Middle East has led to a rise in commodity prices. These changes have already begun to translate into accelerating inflation in many countries. A number of central banks reacted to growing inflationary risks with rate hikes. Expectations for global economic growth are declining. For the Russian economy, disinflationary effects have prevailed so far. Higher commodity prices led to increased export revenue and a stronger ruble. Import demand also grew, but not as significantly as export volumes. Risks of the Middle Eastern conflict dragging on have decreased, but uncertainty remains about the scale of its inflationary consequences for the global economy. They could affect the Russian economy through prices of imported goods and logistics costs. Moving to risks overall — according to our estimates, their balance has shifted more toward inflationary. Regarding the risk of fiscal policy parameter revision, it has essentially already materialized, but uncertainty about its scale remains. Fiscal and monetary policy simultaneously influence economic demand. If the fiscal policy contribution grows to achieve priority objectives, then monetary policy must play a stabilizing role, and its tightness must adjust to somewhat reduce credit's contribution to aggregate demand. Only in this case can we avoid demand overshooting the economy's ability to expand supply, triggering another wave of inflation. Risks from labor shortages and inflation expectations persist. Inflationary risks related to temporary supply reductions in certain sectors have grown. And about risks from external conditions, I already spoke. The disinflationary risk remains weaker domestic demand dynamics compared to our baseline estimates.

And finally, about our future decisions. Current price growth rates have declined noticeably, but we observe growing risks that could lead to accelerating inflation in the future. Particularly important for us are those risks that could sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags. Therefore, our decisions must be forward-looking. And I'll emphasize that neither further key rate reduction nor the size of the step at each specific meeting are predetermined. We may need pauses to assess all incoming information and the effect of our previous decisions. And only maintaining a balanced approach, especially amid high uncertainty, will allow us to achieve sustainable results and stabilize inflation at a low level. Thank you for your attention.

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Moderator7:22:26

Thank you, colleagues. Please, your questions — and don't forget to introduce yourselves and name your publication. Masha, please, first row.

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Maria Stepanova7:22:36

Good day, TASS news agency, Maria Stepanova. What options were considered today? You already said further steps are not predetermined, but has the probability increased that you will use 0.25 again? Thank you.

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Elvira Nabiullina7:22:53

Thank you. A traditional question for us. This time, three rate options were considered in detail: leave at 14.5%, cut to 14.25%, or cut to 14% flat. Incidentally, all these options were raised by economists. There were weighty arguments for each, and a solid number of discussion participants spoke in favor of each. And in my view, the final decision represents a genuinely balanced consideration of all arguments, including from the perspective of the cost of error. If we generalize, the positions of discussion participants differed on three main parameters. First, the assessment of the degree of sustainability of the stable inflation indicators observed in recent months. We have a stable inflation indicator and need to understand how truly sustainable they are. Second, the assessment of the scale of additional inflationary factors that emerged since the last board meeting — on the demand side, the shift in budget plans for 2026 and subsequent years, and on the supply side, the temporary reduction in fuel production. The third parameter is the assessment of the tightness of monetary conditions. This is important in light of the significant acceleration of lending growth in the last two to three months. Practically, all participants noted that room for further rate cuts has shrunk. But how much it has shrunk was — and apparently will be — a subject of discussion at the next meeting.

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Moderator7:25:01

Thank you. Nastya, please.

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Anastasia Saveleva7:25:07

Thank you. Saveleva Anastasia, Interfax. You already said room for further rate cuts has shrunk. Could you say how much the budget factor influenced this? And do you see risks that this room could shrink further due to the fuel market situation, which could, for example, have secondary effects — rising prices for other product groups, for example food — and lead to rising inflation expectations?

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Elvira Nabiullina7:25:42

We generally assess the reduction in room for cutting the key rate. This will be discussed concretely at the next meeting, which is a landmark one. But the factors influencing this and their specific values are difficult to measure precisely. We note that inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it's very important how the situation develops and whether these factors can transition from one-time occurrences to sustained price pressure, primarily through rising inflation expectations. Gasoline is a marker product, and in the June surveys this isn't present yet. We will look at the July surveys on inflation expectations, which will come out before the next meeting. And it will be important to see how this affects costs across a broad range of goods. So these are factors that need to be assessed. I'll say again that this was indeed one of the main factors in reaching a balanced decision and reducing the rate cut pace.

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Moderator7:26:58

Colleagues, please, Pavel.

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Pavel7:27:05

Thank you. You noted in the press release that a higher key rate trajectory may be needed. Does this apply to 2028? Thank you.

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Elvira Nabiullina7:27:19

We will present our updated view of the key rate trajectory at the landmark meeting, as I already said, and assess the dynamics needed for 2026, 2027, and 2028. But most likely the changes will mainly affect 2026-2027. But this will still need to be reviewed and recalculated. Yes, please, Alexey Borisovich.

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Alexey Borisovich7:27:43

Yes. Without pre-empting the July meeting, since all factors influence the entire forecast, not just those that have changed to date. But we must proceed from the assumption that if in 2028 fiscal policy remains not in a zero structural primary deficit mode, this will mean that monetary policy will most likely not be fully neutral in 2028, because it will have to compensate for that. Again, ceteris paribus, including how this fiscal policy change will affect the neutral rate level. We do this assessment annually before the main directions of monetary policy. So specific figures cannot be given now, but by the next meeting, I think there will be more clarity on this. Thank you.

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Moderator7:28:51

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov7:28:56

Good day. Mitrofanov Nikita, Telegram channel Economical. I continue developing my macroeconomic model that tries to predict your decision. Today the model predicted a 70% probability of a 0.5% cut and a 30% probability of a 0.25% cut. This decision was based mainly on calculated inflation data — and my calculated data were even worse than in your press release. Reality turned out better. So it seemed for my model that a 0.5% cut was more likely. But alongside this, the 30% probability was because inflation expectations remain quite high, unemployment is quite low, and a new factor has emerged that was heavily discussed — the structural deficit of the Russian Federation budget. In this context, I'd like to ask: what influence does monetary policy and its tightness have on money supply growth through the budget channel, since it seems monetary policy and rate decisions primarily affect the private sector and to a lesser degree the budget channel? Thank you.

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Elvira Nabiullina7:30:24

Well, naturally, our decisions primarily affect the rate of lending growth, market lending first and foremost. That's why we always say the share of preferential loans matters to us, because preferential loans as a whole are insensitive to our rate decision. We understand that we mainly influence private credit. Our monetary policy certainly affects the budget as well, because the budget has internal debt and debt servicing costs. Plus the preferential programs I mentioned, where the budget took on a significant part of the interest rate risk. But overall, monetary policy doesn't have such a direct impact on the budget channel. Rather, on the contrary, there's a budget decision being prepared by the government and passed by the Duma to achieve priority objectives. And in this situation — in the situation where we have full employment of resources — the Central Bank plays a compensating role. That is, we must, taking as given how much money flows through the budget channel, adapt our monetary policy so that the right amount of money flows through private credit into the economy so that inflation doesn't accelerate. And the complexity is that our decisions act with lags. I spoke about this lag — today's decisions will be reflected over three to six quarters. That's why we say earlier predictability of fiscal policy is important to us. So there is an interconnection, but we function here more as a stabilizer.

M

Moderator7:32:25

Thank you. And the next question online is from Sergey Enquist, publication NGS55, city of Omsk. Has the Central Bank revised its key rate forecast after the St. Petersburg International Economic Forum stated that by the end of the year it should become single-digit?

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Elvira Nabiullina7:32:46

No. Well, first, I'll remind you that we have not revised our key rate forecast. We revise it at landmark rate-setting meetings. The next one will be in July, when we generally review the forecast, because the rate forecast depends on how we revise the overall forecast, how our view of future developments changes. As for single-digit rate levels, our April forecast did not envisage reducing the key rate to single-digit levels — below 10% — this year. I said that inflation risks have even increased, and if the key rate trajectory forecast is revised, it would be more likely upward rather than downward. And the room for reducing the key rate by the end of this year and perhaps into next year — the question about 2028 was also raised — has most likely shrunk. And not because we think additional cooling of aggregate demand is needed, but because — I'll emphasize — aggregate demand. We do not think aggregate demand should cool further, but because government demand will make a larger contribution to both demand and GDP growth in 2026 and 2027, meaning the private sector's contribution must be more restrained. Otherwise, no additional GDP growth will occur, and all this demand stimulus will once again translate into accelerating inflation. We must not allow this, because everyone will lose — both the population and business. Even those currently asking for faster rate cuts will face rising costs. And with accelerating inflation, market rates will not fall — they will rise. Therefore, our task is to prevent this situation. We certainly listen to business experts, their arguments, including those voiced at the forum, and include them in the list of views we discuss at the board of directors. But decisions are made based on our own independent analysis of data. We analyze a large amount of data — not only statistical and not only current data — I'll emphasize again — but also medium-term projections of how the situation will develop, taking into account monetary policy lags.

M

Moderator7:35:33

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov7:35:39

Evgeny Grachov, Izvestia newspaper. Tell me, in conditions where representatives of various agencies and business increasingly speak about the need for more active key rate cuts, is the Bank of Russia experiencing additional pressure on monetary policy issues? And have regulators, against the backdrop of these discussions, recently begun to take into account a broader spectrum of economic indicators when making decisions, particularly related to increased business risks? Thank you.

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Elvira Nabiullina7:36:05

Well, I already said that we certainly take into account the opinions of experts and business. There are many voices calling for rate cuts. They are quite understandable. Indeed, there are many from both agencies and business, but we do not perceive this as pressure. I've said this repeatedly, and decisions are made independently based on our own analysis. We have always taken into account and continue to take into account a wide range of indicators — not only inflation and inflation expectations, but also the labor market and economic activity, by sector and region. We pay particular attention to business surveys. I'll remind you of our regular monitoring of 15,000 enterprises. Its results are available for review and contain a lot of interesting information. We conduct meetings with business. Once again, we discuss a wide range of indicators. Sometimes we hear a somewhat simplified notion — for example, that the Bank of Russia reduces everything to unemployment. That is absolutely not so. In my speeches and those of my colleagues, we constantly emphasize that we look at a large amount of data characterizing the labor market — temporary employment, downtime, resumes, vacancies, wage growth rates, how they relate to productivity, by sector and region. Therefore, for each area there is a large list of data we use. And your question is indeed correct — when making decisions, one needs to use the full range of data characterizing the economic situation.

M

Moderator7:38:02

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna7:38:07

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I cannot help but ask — your prolonged absence gave rise to numerous rumors about personnel changes, about you wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina7:38:24

I can only confirm that I indeed had a cold and lost my voice for some time. And the only thing I can say is to thank those who sincerely worried about my health.

M

Moderator7:38:39

Colleagues, please, Georgy.

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Georgy Nedogibchenko7:38:44

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of any discussions about tightening budget rule parameters for 2027, with the cutoff price lowered to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina7:39:04

Well, our position here has not changed. First, we consider the budget rule to be a fundamental foundation for macroeconomic stability. The current base price is somewhat high from the perspective of conservative estimates of long-term oil market trends. In our view, it should be lowered to ensure long-term fiscal stability of government finances and macroeconomic stability. And of course, the government will propose the specific cutoff level. But it should be said that with a lower base price for the budget rule, monetary policy will have a stronger foundation for macroeconomic stability.

...macroeconomic stability. Monetary policy will take this into account when we discuss our decisions. Alexey Borisovich, we have a good understanding of the course of this discussion regarding the monetary policy decision, understanding what will happen with the budget rule in 2027.

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Moderator7:40:19

Colleagues, please. Yulia.

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Yulia Rostorgoeva7:40:23

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, if we believe US authorities' statements, has concluded. Oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and the economy as a whole in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term?

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Elvira Nabiullina7:40:46

Thank you. When you speak about balance of payment risks from the conflict's conclusion, you probably mean oil prices may start declining. But these risks are neutralized by the budget rule actions we discussed. So we don't see significant risks from this point of view. The overall impact is still difficult to evaluate — assessing the consequences for the world economy and inflation is premature. We see it has already affected price growth and economic dynamics in many countries, which may affect Russia through future demand for our goods. The current impact is disinflationary — exporters' revenue grew and the ruble strengthened. But pro-inflationary effects exist too: rising logistics costs and import prices. The longer the conflict continues, the greater the pro-inflationary risks. If it concludes, these risks decrease compared to what we previously thought.

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Moderator7:42:25

Thank you. The next online question is from Marina Ukhapova, Nizhegorodskaya Pravda, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova7:42:34

Hello. The course of reducing the key rate has been maintained for a year now. What effect has this had on the lending market? Perhaps more affordable loans for businesses, mortgage accessibility, any new lending offers?

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Elvira Nabiullina7:42:51

The key rate reduction has led to lending growth. In market segments, almost four times more market mortgages were issued in January-April compared to the same period last year. Corporate non-subsidized lending volumes also grew. In business surveys, companies are increasingly less likely to cite working capital financing shortage among main difficulties — the share dropped to 10%, almost 1.5 times less than before we started cutting rates. The rate increase a year ago was bitter but absolutely necessary medicine. A year ago, the key business factor was rising costs — inflationary risks — with every fourth company complaining. Now one-fifth mentions it, a direct consequence of inflation reduction through tight monetary policy.

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Moderator7:44:48

Colleagues, please. Zulfia, I see your hand.

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Zulfia Khamitova7:44:53

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary GDP estimate from the start of the year? Do you see risks of economic cooling, and what key rate does Russia need for economic activity to grow at a faster pace?

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Elvira Nabiullina7:45:09

According to our estimates, the economy continues moderate growth in the first half of the year. Q1 GDP declined 0.2% per Rosstat, largely due to seasonal and calendar factors. April brought GDP into positive territory; we estimate January-April growth at 0.3%. By mid-year, we expect around half a percentage point. Business and consumer activity are accelerating in May. We don't see risks of economic cooling. The key markers — inflation falling well below target, rising unemployment, declining real incomes — none are present. Balanced monetary policy protects against this. For sustainable high growth, it's not about the rate level — what's needed are mechanisms and institutions stimulating production capacity development and labor productivity growth.

M

Moderator7:47:09

Colleagues, please. Artem.

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Artem Gorun7:47:14

Good day. Gorun Artem, InvestFuture. My question is about the labor market. Unemployment remains near historic lows, but the picture is contradictory — large companies continue staff reductions, while the Ministry of Labor estimates about 7.5% of job functions could be replaced by AI soon. How do you assess these changes? Does this indicate labor market tensions are easing? How might this affect your assessment and rate decisions?

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Elvira Nabiullina7:48:00

There are certain signs of labor market cooling, but the pace of tension reduction is slowing. The share of enterprises experiencing workforce shortages hasn't decreased in recent months. Workforce shedding at some enterprises attracts attention, but the national scale is small — about 0.3% of all employed — and not growing. Unemployment isn't rising because workers find jobs elsewhere. Regarding AI, we don't yet see a macroeconomic labor market effect — for individual companies it increases productivity, and this factor's influence will grow. The labor market is an important factor in rate decisions, but not the only one. We consider the full set of factors affecting the economy and inflation.

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Moderator7:49:52

Marina, yes, please.

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Marina Pimionova7:49:56

Marina Pimionova, NTV. Continuing the theme of business pressure, a bit about sports. The FIFA World Cup is underway. In football there's the concept of an own goal. Why can't the Central Bank convince businesses that it's not scoring an own goal against the Russian economy?

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Elvira Nabiullina7:50:20

We certainly feel more like a goalkeeper defending against inflation. Many matches are decided by goalkeeper reliability. Someone has to hold and defend these goals. Alexey Borisovich, do you have anything to add?

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Alexey Borisovich7:50:47

I can only remind you of the Russia-Spain match in 2018. The result was decided on penalties thanks to our goalkeeper's reliability.

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Moderator7:51:08

Colleagues, please. Nastya, second row.

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Anastasia Bashkatova7:51:13

Hello. Thank you. Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank present as convincing proof of monetary policy effectiveness? And: given that reaching the 4% inflation target remains difficult, how does the Central Bank view proposals to use purified inflation — removing factors that changed the economy since 2022, particularly the special military operation and stricter sanctions?

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Elvira Nabiullina7:52:01

You're right about convincing indicators. The criterion of truth is fact. Year-on-year inflation halved over the last year — not by itself, but primarily through monetary policy, even though pro-inflationary risks materialized. People forget rates work with a lag — the effect operates over 3-6 quarters. Today's slowdown is due to the high rate maintained from 21%. The logic that higher rates cause higher inflation doesn't hold — with the rate increase, inflation started declining after last March's peak. On purified inflation: you can purify it however you want, but rates won't become lower. If overall inflation is 10% and purified is 2%, credit rates won't be 2%. For more moderate rates, we need to reduce overall inflation. People's purchasing power is determined by overall price growth. Analytically you can examine any purifications, but the focus must be on reducing overall inflation and price pressure. Yes, Alexey Borisovich.

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Alexey Borisovich7:55:20

Monetary policy cannot influence the root causes of inflation related to supply-side changes. But it can bring demand in line with circumstances, and then inflation will be low and rates moderate.

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Moderator7:55:44

Colleagues, please. Dmitry.

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Dmitry Maroko7:55:48

Dmitry Maroko, Russia 24. This week a court rejected Euroclear's request to suspend enforcement proceedings on the Central Bank's lawsuit. What does this mean in practice? Does it bring us closer to returning frozen assets?

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Elvira Nabiullina7:56:04

I can only repeat the general formula since we don't disclose details. I confirm once more: we don't disclose details or tactics. We will take all measures and use all legal means to protect our legitimate rights.

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Moderator7:56:25

Colleagues, please. Yakov.

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Yakov Timakov7:56:30

Good day. Yakov Timakov, Expert magazine. Question for Alexey Borisovich. Not long ago, Elvira Nabiullina was compared to Volcker. The Fed chairman in the seventies-eighties was a proponent of tight monetary policy, resulting in sustained low inflation but also recession. I'm not drawing direct parallels since the Central Bank's sectoral decline arguments are convincing and not everyone agrees with the recession thesis. My question is about long-term consequences. After the Volcker shock, Reaganomics came — tax cuts, deregulation. The government is taking necessary measures, but supply recovery may take time.

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Elvira Nabiullina7:57:21

The government is taking necessary measures, but supply recovery may take time. Fuel price increases may affect inflation expectations, as gasoline is a sensitive product. Additionally, agricultural product prices reversed after an atypically strong spring decline — we see this in operational data. Concluding the inflation theme: in July there will be no utility tariff increases as in past years — indexation was moved to October. This means year-on-year inflation may temporarily decline slightly, but it's only a redistribution of price growth within the year. Second, on the economy: Q2 2026 economic activity is improving. Temporary Q1 factors have been exhausted. H1 trajectory corresponds to moderate growth, though there is significant sectoral heterogeneity linked to structural restructuring. State demand acceleration narrows space for private demand. Consumer activity grows moderately — car purchases, services demand remain high, supported by wage growth. Labor market tension is easing slowly; wage growth and productivity convergence is needed. Third, monetary conditions: rates continue declining in most segments. Long-term OFZ yields grew, reflecting fiscal policy uncertainty premium. Most corporate loans are at floating rates, so rate cuts translate immediately into lower payments. Credit growth accelerated notably in April-May in retail and corporate segments, requiring special attention. If this proves sustainable, current conditions may no longer be seen as restrictive. Budget contribution to money supply growth remains elevated and will increase further. If credit continues at such pace, tighter policy may be needed. Money supply growth is at the upper bound of our expectations, requiring greater tightness than our April forecast. On external conditions: the Middle East situation raised commodity prices, transmitting into faster global inflation. Several central banks raised rates. For Russia, disinflationary effects have dominated through higher export revenue and a stronger ruble. Risk assessment has shifted toward pro-inflationary. Fiscal policy revisions are materializing. Budget and monetary policy both affect demand. If fiscal expands, monetary policy must stabilize by reducing credit's contribution to aggregate demand. Future decisions: current price growth slowed but risks of acceleration are growing. Decisions must be forward-looking. Neither further rate cuts nor their pace are predetermined. Pauses may be needed. Only a balanced approach amid high uncertainty will achieve sustainable inflation stabilization.

M

Moderator8:06:29

Thank you, colleagues. Please ask your questions and don't forget to introduce yourself and name your publication. Masha, please, first row.

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Maria Stepanova8:06:39

Good day. Maria Stepanova, InfoNews Agency. What options were considered today? You said further steps aren't predetermined, but has the probability of another 0.25% cut increased?

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Elvira Nabiullina8:06:57

A traditional question. This time three rate options were specifically considered: keep at 14.5%, cut to 14.25%, or cut to 14.00%. All had strong arguments, and a significant number of participants supported each. The final decision reflects balanced consideration of all arguments, including the cost of error. Participants differed on three parameters: sustainability of underlying inflation indicators, the scale of additional pro-inflationary factors (budget plan shifts and temporary fuel production cuts), and tightness of monetary conditions given credit growth acceleration. Practically all participants noted the space for further rate cuts has narrowed, but by how much remains the subject of discussion.

M

Moderator8:09:05

Thank you. Nastya.

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Anastasia Saveleva8:09:10

Saveleva, Anastasia, Interfax. You said space for further rate cuts has narrowed. How much did the fiscal factor influence this? And do you see risks of further narrowing under the fuel market situation, which may have secondary effects — food price increases — and could lead to rising inflation expectations?

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Elvira Nabiullina8:09:44

We assess the narrowing of space for further key rate cuts. This will be specifically discussed at the next key meeting. The factors and their values are hard to measure, but pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it's crucial whether they transition from one-off to sustained price pressure, primarily through inflation expectations. Gasoline is a marker good. June surveys don't yet show this effect — we'll examine July inflation expectation surveys before the next meeting. It will be important to see how this affects costs across a broad range of goods. This was indeed one of the main factors in the balanced decision to reduce the rate cut pace.

M

Moderator8:11:01

Colleagues, please. Pavel.

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Pavel8:11:06

Pavel, Vedomosti. In the press release you noted a potentially higher key rate trajectory may be needed. Does this apply to 2028?

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Elvira Nabiullina8:11:23

We will provide our updated key rate trajectory at the key meeting and assess what dynamics may be needed for 2026, 2027, and 2028. But most likely, changes will mainly affect 2026-2027. This still needs review and calculation.

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Alexey Borisovich8:11:46

Without pre-empting the July meeting, we must proceed from the assumption that if in 2028 fiscal policy remains not at zero structural primary deficit, monetary policy likely won't be fully neutral either, because it would need to compensate. We assess the neutral rate level annually before presenting the main monetary policy guidelines, so specific figures can't be given now, but by the next meeting there should be more clarity.

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Moderator8:12:54

Thank you. Colleagues, please. Nikita.

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Nikita Mitrofanov8:12:59

Good day. Mitrofanov Nikita, Telegram channel Economica. My macroeconomic model predicted a 70% probability of a 0.5% cut and 30% of a 0.25% cut. The 30% was due to high inflation expectations, low unemployment, and the new structural budget deficit factor. What influence does monetary policy tightness have on money supply growth through the fiscal channel, since it seems policy primarily affects the private sector?

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Elvira Nabiullina8:14:27

Our decisions primarily affect market lending growth rates. We emphasize the share of subsidized credits since they're largely insensitive to rate decisions. Monetary policy also affects the budget through internal debt servicing and subsidized programs. But overall, it doesn't have a direct effect on the fiscal channel. Rather, budget decisions prepare spending for priority tasks, and the Central Bank plays a compensating role. Taking fiscal money flows as given, we adapt monetary policy so private credit provides enough money without reigniting inflation. The difficulty is our decisions work with 3-6 quarter lags. That's why we emphasize earlier predictability of fiscal policy. The connection exists, but we act as a stabilizer.

M

Moderator8:16:28

The next online question is from Sergei Enkvist, NGS55, Omsk. Has the Central Bank revised its key rate forecast after the St. Petersburg International Economic Forum stated it should become single-digit by year-end?

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Elvira Nabiullina8:16:49

No. We haven't revised the key rate forecast — we do this at key meetings, the next in July. Our April forecast didn't assume single digits below 10% this year. Pro-inflationary risks have even grown, so any revision would be upward, not downward. The space for rate cuts by year-end and into next year has likely shrunk. Not because aggregate demand needs further cooling — we don't think so — but because state demand will contribute more to growth in 2026-2027, so the private sector's contribution must be more restrained. Otherwise demand stimulus would simply reignite inflation. We must not allow this — everyone loses: people and businesses. Even businesses asking for faster rate cuts would face rising costs. With accelerating inflation, market rates wouldn't fall — they'd rise. We listen to business and expert opinions, including from the forum, but decisions are based on independent analysis of data — a large number of data points and medium-term forecasts accounting for monetary policy lags.

M

Moderator8:19:37

Thank you, colleagues. Evgeny, back row.

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Evgeny Grachov8:19:43

Evgeny Grachov, Izvestia. Where various agencies and businesses increasingly call for more active rate cuts, does the Bank of Russia face additional pressure? Have regulators begun considering a broader range of indicators, particularly related to business risks?

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Elvira Nabiullina8:20:08

We take into account expert and business opinions. Many voices call for rate cuts — they're understandable. But we don't perceive this as pressure. We make decisions independently based on our own analysis. We've always considered a broad range of indicators — not just inflation, but the labor market, economic activity by sector and region. We pay special attention to business surveys of 15,000 enterprises. I want to emphasize we look at comprehensive labor market data: temporary employment, downtime, resumes, vacancies, wage growth relative to productivity, sectoral and regional breakdowns. Your question is correct — when making decisions, we need the full range of economic data.

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Moderator8:22:05

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna8:22:10

Elena Fabrichna, Reuters. We're very glad to see you in good health. Your prolonged absence generated many rumors about personnel changes, about you wanting to leave. Can you refute them?

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Elvira Nabiullina8:22:27

I can only confirm that I indeed had a cold and temporarily lost my voice. The only thing I can say is to thank those who sincerely worried about my health.

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Moderator8:22:42

Colleagues, please. Georgy.

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Georgy Nedogibchenko8:22:47

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware whether discussions are ongoing about tightening the budget rule parameters for 2027, with a cutoff price reduction to $50 per barrel? How would such parameters affect monetary policy?

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Elvira Nabiullina8:23:05

Our position hasn't changed. The budget rule is a fundamental basis for macroeconomic stability. The current base price is somewhat high from a conservative assessment of long-term oil market trends. It should be reduced to ensure long-term fiscal and macroeconomic stability. The specific cutoff level will be proposed by the government. With a lower base price, monetary policy will have broader foundations for stability and will take this into account when discussing our decision. Alexey Borisovich, we have a good understanding of the course of this discussion regarding the monetary policy decision, understanding what will happen with the budget rule in 2027.

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Moderator8:31:12

Colleagues, please, Artem.

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Artem Gorun8:31:17

Good afternoon. Artem Gorun, Investfutcher. My question is about the labor market, which we've already touched on. We currently see unemployment remaining near historical minimums, but at the same time the picture is contradictory, because large companies continue reducing their staff. Meanwhile, the Ministry of Labor estimates that about 7.5% of labor functions could be replaced by artificial intelligence in the near future. There seem to be contradictions here. How do you assess these changes? Does this indicate that labor market tension is starting to ease — the one you've been expecting for so long, calling it one of the main factors? And how might this affect your overall assessment and possible rate decisions? Thank you.

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Elvira Nabiullina8:32:03

Indeed, there are certain signs of cooling in the labor market situation. But I noted that we see the pace of easing is decreasing. Looking at surveys, in recent months the share of enterprises experiencing a workforce shortage hasn't declined for the past couple of months. And indeed, attention is often drawn to some workforce shedding and idle time at a number of enterprises. These cases certainly attract attention. But the scale of this within the country is still not large and is not growing. By our estimates, this is about 0.3% of all employed. There are layoffs, but the fact that unemployment isn't growing shows that where there were layoffs in some companies, workers are finding jobs in other companies. As for artificial intelligence, we don't yet see a macroeconomic effect in terms of the labor market. It doesn't yet play a determining role, though for individual companies it increases labor productivity when they skillfully use AI. The influence of this factor will, I think, increase over the years. But to give the most general point, the labor market is an important factor in rate decisions, but not the only one. We consider the entire range of factors affecting the economy and inflation.

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Moderator8:33:55

Marina, please.

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Marina Pimionova8:33:59

Marina Pimionova, NTV, Business News. Continuing the topic of pressure on business, and a bit about sports. The FIFA World Cup is underway. In football, there's a concept called an own goal — scoring into your own net. Why hasn't the Central Bank been able to convince business, and many financially literate people, that it's not scoring into the Russian economy's goal? Thank you.

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Elvira Nabiullina8:34:23

Yes, well, you know, we rather feel like a goalkeeper defending against inflation. And probably many matches are decided by the reliability of the goalkeeper. Someone has to hold and protect those goalposts. Alexey Borisovich, anything to add?

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Alexey Borisovich8:34:51

I can only remind you of the Russia-Spain match in 2018. The result was decided in a penalty shootout thanks to the reliability of our goalkeeper.

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Moderator8:35:11

Colleagues, please, Nastya, second row.

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Anastasia Bashkatova8:35:16

Hello. Thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank now present to the public as convincing proof of the effectiveness of its monetary policy? And the second part of the question: given that achieving the 4% inflation target still poses difficulties, how does the Central Bank relate to proposals from a number of experts to calculate and use in monetary policy not the conventional overall consumer inflation, but a different inflation cleaned of factors that since 2022 have strongly changed the economic situation — in particular, the factor of the special military operation in all its manifestations, or the factor of stricter sanctions, and so on? Thank you.

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Elvira Nabiullina8:36:04

Thank you. You're absolutely right about convincing indicators. The criterion of truth, as is well known, is a fact. So let's look at the facts, including annual inflation. Year-on-year inflation over the last year has halved. This didn't happen by itself. It wasn't a fortunate coincidence. The circumstances, as you can see, were actually working in the opposite direction — pro-inflationary risks were materializing. And this is primarily the result of monetary policy. But you're right that this effect is sometimes doubted. Perhaps someone forgets that the rate works with a lag. They think that when we have a high rate and high inflation, and then we start lowering the rate, inflation comes down. But when we raised the rate, the effect acts over three to six quarters. And the fact that inflation has relatively slowed today is, of course, the merit of that high rate we maintained for a prolonged period, starting from 21%. If it were otherwise — for instance, we kept the rate at 21% for a long enough time — well, we have to admit, from October 2024 through the summer of last year, inflation started declining despite this. So the logic that high rates from raising rates lead to growing inflation doesn't withstand criticism. When the rate was raised, inflation started declining already after the peak in March last spring. And seeing the sustained slowdown in inflation, we are lowering the rate. Now, the important question: many experts suggest we should not target overall inflation figures but rather underlying inflation, cleaned of everything that's growing. And say, 'what's left is what doesn't grow, and then lower the rate — your monetary policy will be completely different.' You can clean inflation any way you like. By the way, we show inflation figures cleaned of utility tariff growth, of tourism services influence, and so on. We have many such indicators, but interest rates won't be lower because of this. If your overall inflation is 10%, let's say, and cleaned inflation you've so carefully cleaned is 2%, credit rates won't be 2% — they'll still be above 10% in any case. So if we want more moderate rates, we need to lower overall inflation. And for people, it doesn't matter what's driving high inflation. The purchasing power of their savings and incomes is determined by the overall price growth across everything. We can say prices didn't rise for this particular thing, but they rose for everything else, and that matters to people too. So in our view, you can analyze any cleaned figures, but you should target lowering overall inflation and overall price pressure.

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Alexey Borisovich8:39:22

And it's clear that monetary policy cannot influence the root causes of inflation related to supply-side changes. But what it can do is bring demand into alignment with these circumstances, and then inflation will be low and rates will be moderate.

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Moderator8:39:47

Colleagues, please, Dmitry.

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Dmitry Maroko8:39:51

Dmitry Maroko, Russia 24. This week a court rejected Euroclear's motion to suspend enforcement proceedings on the Central Bank's lawsuit. What does this mean in practice? Does it bring us closer to recovering frozen assets? Thank you.

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Elvira Nabiullina8:40:07

Well, I can probably only repeat the general formula here, because we don't disclose details. Let me reiterate — we don't disclose details, we don't disclose our tactics. We will take all measures and use all legal means to protect our legitimate rights.

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Moderator8:40:28

Colleagues, please. Yakov.

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Yakov Timakov8:40:33

Good day. Yakov Timakov, Expert magazine. Alexey Borisovich recently compared Elvira Nabiullina to Volcker, the Fed chairman in the 1970s-80s. Volcker, as is known, was a proponent of tight monetary policy, the result of which was sustained low inflation on one hand and recession on the other. I'm intentionally not drawing direct parallels, since the Central Bank's arguments about sectoral decline sound convincing, and not everyone agrees with the thesis of recession in the Russian economy. My question is not about the current situation but about long-term consequences. After the Volcker shock in the US came the no less famous Reaganomics — tax cuts, deregulation, and so on. The government is taking necessary measures, but restoring supply may take time. And rising fuel prices could affect inflation expectations, since this is a sensitive commodity for both people and companies. Additionally, in recent weeks there's been a reversal in fruit and vegetable prices after an atypically strong decline in spring. We already see this in operational data. And to conclude on the topic of inflation, I'd like to draw attention to a statistical effect that will affect annual inflation figures in the coming months. In July, there won't be a utility tariff increase as last year — their indexation was moved to October. This means annual inflation may temporarily dip slightly due to this factor, but it will only be a redistribution of price growth within the year.

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Elvira Nabiullina8:42:16

Second — the economy. According to operational data, in the second quarter of 2026, as we expected, economic activity indicators are improving. Temporary factors that restrained it at the start of the year, including calendar and weather factors, have been exhausted or reversed. In particular, there's a certain recovery after the cold and snowy winter in construction, which was the main source of the GDP decline in the first quarter. If we analyze the overall economic dynamics for the first half of the year, it corresponds to moderate growth in the output of goods and services. At the same time, the situation varies greatly across industries, and this heterogeneity has grown over the past year. To a large extent this is related to the structural restructuring of the economy. If government demand accelerates significantly, space for expanding private demand — investment and consumption — becomes smaller given limited resources. Certain contribution to strengthening sectoral heterogeneity comes from shorter-term factors such as the situation on world commodity markets and temporary removal of certain processing capacities. As for consumer activity, its moderate growth continues. In spring months, automobile purchases accelerated. Demand remains high in the services segment. Consumer support comes from wage growth. It has slowed somewhat, and enterprises in their plans are laying in ever more moderate indexations going forward. In addition, there's considerable variation in wage dynamics across industries and types of activity, reflecting the economic heterogeneity I mentioned. Overall, labor market tension is declining slowly. According to information from our regional offices, in a number of regions, the reduction in workforce shortages has stalled in recent months. Under these conditions, for sustainable easing of pressure on costs and prices, further convergence of wage growth and productivity is needed. I want to emphasize: to increase productivity, the primary requirement is that labor be maximally deployed where it brings the greatest returns for the economy. Third — monetary conditions. Interest rates in most segments of the financial market continued to decline smoothly in response to previous monetary policy decisions. At the same time, long-term federal loan bond yields rose somewhat, reflecting a growing term premium linked to uncertainty about fiscal policy. I want to note that most loans to companies, especially large and medium-sized, are now issued at floating rates. And for such loans, a reduction in the key rate translates into lower interest payments immediately and in full, not only for new loans but also for existing ones. The savings rate, while declining slightly, remains quite high. Ruble funds of the population in banks continue to grow. Among bank products, the popularity of savings accounts is increasing, and citizens' interest in financial market instruments and non-financial instruments continues to rise. In April-May, credit growth accelerated noticeably. In retail, there was a pickup in unsecured and auto lending, as well as market-rate mortgage lending. Corporate credit growth rates increased substantially. The dynamics of monetary indicators currently require particular attention from us. First, if the acceleration of lending proves sustainable rather than a short-term spike after low values at the start of the year, this could indicate that current monetary conditions are no longer perceived by borrowers as restrictive. Second, the contribution of fiscal policy to money supply growth remains elevated, and given the revision of budget parameters, it will be even greater going forward than we previously assumed. If credit growth continues at such high rates under these conditions, it may require a tighter policy than expected in the baseline scenario. The combined impact through budget and credit channels has already led to money supply growth running at the upper bound of our expectations or even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightening than was built into our April forecast. Now on external conditions. The situation in the Middle East led to higher commodity prices. These changes have already started translating into accelerated inflation in many countries. Several central banks responded to rising pro-inflationary risks by raising rates. Global economic growth expectations are declining. For the Russian economy, disinflationary effects have so far dominated. Higher commodity prices led to increased export revenue and ruble strengthening. Import demand also grew, but not as significantly as the value of exports. Risks of the Middle Eastern conflict dragging on have decreased, but uncertainty remains about the scale of its pro-inflationary consequences for the global economy. They could affect the Russian economy through imported goods prices and logistics costs. Moving to overall risks — in our assessment, the balance has shifted further toward pro-inflationary. Regarding the risk of revising fiscal policy parameters, one could say it's essentially already materializing, but uncertainty about its scale remains. Fiscal and monetary policy simultaneously affect economic demand. If the contribution of fiscal policy is growing in pursuit of priority objectives, then monetary policy must serve as a stabilizer, and its tightness must change to accordingly somewhat reduce the contribution of credit to aggregate demand. Only in this case can we avoid demand overshooting the economy's capacity to expand supply and triggering another wave of inflation. Risks remain from workforce shortages and inflation expectations. Pro-inflationary risks have risen related to temporary supply reductions in certain industries. And I've already spoken about risks from external conditions. The disinflationary risk remains lower domestic demand dynamics compared to our baseline estimates. Finally, on our future decisions. The current pace of price growth has slowed notably, but we observe growing risks that could lead to accelerated inflation in the future. Especially important for us are those that could sustainably influence demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags. Therefore our decisions must be forward-looking. I want to emphasize that neither further key rate reductions nor the size of the step at each particular meeting are predetermined. We may need pauses to assess all incoming information and the effect of our previous decisions. Only maintaining a balanced approach, especially under high uncertainty, will allow us to achieve a sustainable result and stabilize inflation at a low level. Thank you for your attention.

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Moderator8:50:33

Thank you, colleagues. Please, your questions — and don't forget to introduce yourself and name your publication. Masha, please. First row.

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Maria Stepanova8:50:42

Good day, Information Agency. Maria Stepanova. What options were considered today? You already said further steps are not predetermined, but has the probability increased that you would again use 0.25? Thank you.

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Elvira Nabiullina8:51:00

Thank you. That's a traditional question for us. This time, three rate options were considered in detail: leaving the rate at 14.5%, cutting it by 25 basis points, and cutting it to 14% flat. Incidentally, all these options appeared in economists' questions. There were weighty arguments for each option, and, I must say, a substantial number of discussion participants voiced support for each. In my view, the final decision was indeed a balanced consideration of all arguments, including from the standpoint of error costs. To generalize, the participants' positions differed on three main parameters. First — assessment of the sustainability of the underlying inflation indicators observed over recent months. Second — assessment of the scale of additional pro-inflationary factors that emerged since the last Board meeting. On the demand side, this is the shift in fiscal plans for 2026 and beyond. On the supply side, including temporary production cuts in fuel. The third parameter is the assessment of how tight monetary conditions are, which is important given the significant acceleration in lending growth over the past two to three months. In practice, all participants noted that the space for further rate cuts has shrunk. But to what extent it has shrunk was and apparently will continue to be a subject of discussion at the next meeting.

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Anastasia Saveleva8:53:08

Thank you. Anastasia Saveleva, Interfax. You've already said that the space for further rate cuts has shrunk. Could you say how much the fiscal factor influenced this? And do you see risks that this space could shrink further due to the situation on the fuel market — for instance, through secondary effects, price increases on other groups of goods such as food, and potentially rising inflation expectations?

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Elvira Nabiullina8:53:47

We assess overall that the space for reducing the key rate has diminished. The specifics will be discussed at the next meeting, which is a structural meeting. As for the factors influencing this, it's difficult to measure the specific contribution of each factor, but we note that pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it's very important how the situation develops and whether these factors can transition from one-off to sustained price pressure, primarily through higher inflation expectations. Gasoline is a mark-up commodity. In the June surveys, this isn't yet showing up. We'll look at the July surveys on inflation expectations, which will come out before the next meeting. And it will be important to see how this affects overall costs across a broad range of goods. So these are factors worth assessing. Let me reiterate, this was indeed one of the main factors in reaching the balanced decision to reduce the step size in lowering the rate.

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Moderator8:55:05

Colleagues, please. Pavel.

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Pavel8:55:09

Thank you. Pavel, Verstka. You noted in the press release that a higher key rate trajectory may be needed. Does this relate to 2028? Thank you.

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Elvira Nabiullina8:55:26

We will present our updated view of the key rate trajectory, as I already said, at the structural meeting. We'll assess the dynamics needed for 2026, 2027, and 2028. Most likely, changes will more so affect 2026 and 2027, but it will still need to be reviewed and recalculated. Alexey Borisovich, please.

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Alexey Borisovich8:55:50

Yes. Without prejudging the July meeting — because all factors influence the overall forecast, not just those that have changed to today — but we must proceed from the assumption that if in 2028 fiscal policy continues not to be in a zero structural primary deficit mode, that would mean monetary policy most likely won't be fully neutral in 2028, because it would need to compensate for that. Again, all else being equal, including how this fiscal policy change will affect things — we'll make an assessment of the neutral rate level. We do this each year before presenting the key guidelines for monetary policy. So indeed, specific figures can't be said now, but by the next meeting, I think, there will be more clarity on this matter.

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Moderator8:56:57

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov8:57:02

Good day. Nikita Mitrofanov, Telegram channel Economic. I continue developing my macroeconomic model that tries to predict your decisions. Today the model predicted a 70% probability of a 0.5% rate cut and 30% probability of 0.25%. The model's decision was based mainly on calculated inflation data, and my calculated data were even worse than what you had in the press release. So reality turned out better. It seems for my model a 0.5% cut would be more likely. But I'd like to clarify: the 30% probability was because inflation expectations remain quite high, unemployment is quite low, and a new factor emerged that was highlighted prominently — the structural deficit of the Russian federal budget. In this context, I'd like to ask: what impact does the monetary policy and tightness of monetary policy have on the growth of money supply from the budget channel? Since this is a factor that influences things, but it seems that monetary policy primarily affects the private sector and less so the budget channel. Thank you.

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Elvira Nabiullina8:58:30

Well, naturally, our decisions primarily affect the pace of lending growth, market lending above all. That's why we always say the share of subsidized loans matters to us, because subsidized loans as a whole are insensitive to our rate decision. We clearly have a greater and primary impact on private credit. Our monetary policy also affects the budget, because the budget has internal debt with servicing costs, plus the subsidized programs I mentioned where the budget has taken on a significant part of the interest risk. But overall, monetary policy doesn't have a direct impact on the budget channel. It's rather the reverse — there's a budget decision being prepared by the government, adopted by the Duma, to fulfill priority objectives. And in a situation where we have full utilization of resources, the Central Bank performs a compensating role. That is, we must, taking as given how much money flows through the budget channel, adapt our monetary policy so that through private credit, the amount of money flowing into the economy doesn't fuel inflation. The difficulty is also that our decisions work with lags. I spoke about this lag — today's decisions will play out over three to six quarters. That's why we say we need greater earlier predictability of fiscal policy. So there is an interconnection, but it's more like we act as a stabilizer here.

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Moderator9:00:31

Thank you. The next question is online from Sergey Enquist, NGS55, Omsk. Has the Central Bank revised its key rate forecast after the St. Petersburg International Economic Forum stated that the rate should become single-digit by year-end?

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Elvira Nabiullina9:00:52

No. First, let me remind you that we don't currently revise the key rate forecast. We revise it at structural rate meetings. The next one will be in July when we generally revise the forecast, because the rate forecast depends on how we overall revise our outlook. As for the single-digit level, our April forecast didn't presume a key rate reduction to single-digit levels — below 10% — this year. I said that pro-inflationary risks have even grown, and if the rate trajectory forecast is revised, it would more likely be upward, not downward. The space for reducing the key rate through the end of this year and perhaps through next year — and the question about 2028 was also asked — has most likely shrunk. Not because we think further aggregate demand cooling is needed — I want to emphasize, we don't think aggregate demand needs to cool further — but because government demand will contribute more to demand and GDP growth in 2026 and 2027, so private sector contribution must be more restrained. Otherwise, there won't be additional GDP growth — all this demand stimulation will simply go into accelerating inflation. We must not allow this, because everyone loses from it: both the public and business. Even the business that's currently calling for faster rate cuts would face rising costs from accelerating inflation. And with accelerating inflation, market rates won't fall — they'll rise. So our task is to prevent this situation. Of course, we listen to and hear business and experts, including arguments made at the forum. We include them in the list of views that we discuss with colleagues at the Board meeting, but we make decisions based on our own independent analysis of data. We analyze a large volume of data — not only statistical, not only current data, but also medium-term forecasts considering monetary policy lags.

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Moderator9:03:40

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov9:03:46

Evgeny Grachov, Izvestia newspaper. In conditions where representatives of various agencies and business increasingly speak about the need for more active key rate cuts, is the Bank of Russia experiencing additional pressure on monetary policy matters? And have regulators, against the backdrop of these discussions, started considering a broader range of economic indicators in decision-making — in particular those related to increased business risks? Thank you.

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Elvira Nabiullina9:04:11

Well, I've already said that we certainly take into account the views of experts and business. There are indeed many voices for rate cuts, from both agencies and business. They're quite understandable. But we don't perceive this as pressure. I've spoken about this repeatedly, and we make decisions independently based on our own analysis. We have always considered and continue to consider a broad range of indicators — not only inflation and inflation expectations, but also the labor market, economic activity, including by industry and region. We pay particular attention to business surveys. I remind you of our regular monitoring of 15,000 enterprises — you can certainly familiarize yourself with its results. There's a great deal of interesting information there, and we conduct meetings with business. So a broad range of indicators. Sometimes I hear a somewhat simplified view, for example, about the labor market, that the Bank of Russia reduces everything to the unemployment rate. That's absolutely not the case. I and my colleagues always emphasize that we look at a large volume of data characterizing the labor market situation — temporary employment, idle time, resumes, vacancies, wage growth rates, how it relates to productivity, by industry, by region. So for each direction, it's a large list of data that we use. Your question is really valid, because decision-making requires using the full range of data characterizing the economic situation.

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Moderator9:06:08

Thank you, colleagues. Elena Fabrichna.

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Elena Fabrichna9:06:13

Elena Fabrichna, Reuters agency. We're very glad to see you in good health. I can't help but ask — your prolonged absence generated numerous rumors about personnel changes, about you wanting to leave. Can you refute them? Thank you.

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Elvira Nabiullina9:06:30

I can only confirm that I indeed had a cold and temporarily lost my voice. The only thing I can say is to thank those who sincerely worried about my health.

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Moderator9:06:46

Colleagues, please, Georgy.

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Georgy Nedogibchenko9:06:50

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware, is it participating in discussions about tightening the parameters of the fiscal rule for 2027 — with a reduction of the cut-off price to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina9:07:10

Our position hasn't changed. First, we believe the fiscal rule is a fundamental foundation of macroeconomic stability. The current base price is somewhat high from the standpoint of conservative estimates of long-term trends in the oil market. In our view, it should be reduced to ensure long-term fiscal stability, state financial stability, and macroeconomic stability. The specific cut-off level — that decision will be proposed by the government. But I should say that a lower base price for the fiscal rule would certainly mean a stronger foundation for macroeconomic stability in terms of monetary policy. Monetary policy will take this into account when we discuss our decision. Alexey Borisovich — we have a good understanding of the progress of this discussion regarding the development of monetary policy parameters now, taking into account what will happen with the fiscal rule in 2027.

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Moderator9:08:25

Colleagues. Please, Yulia.

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Yulia Rostorgoeva9:08:30

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, if we believe U.S. statements, is concluded. Oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and the economy overall in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina9:08:53

When you speak of balance of payments risks from the conflict's conclusion, you probably mean oil prices could start declining. But these risks are actually neutralized or compensated by the operation of the fiscal rule we discussed. So we don't see significant risks from this standpoint. As for the overall impact — it's probably still difficult to assess fully, because evaluating the consequences of the conflict for the global economy and global inflation, even if it's finally concluded, is still premature. We see that in many countries it already influenced price growth and economic dynamics, which could also affect the Russian economy through future demand for our goods. So far, the crisis's impact has been disinflationary — exporters' revenue grew, the exchange rate strengthened. But there are also pro-inflationary effects, certainly — rising logistics costs for our businesses, rising import prices. Pro-inflationary risks also exist. We said the longer the conflict goes on, the greater the pro-inflationary risks. We now assess that pro-inflationary risks from this side are decreasing compared to what we previously thought.

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Moderator9:10:31

Thank you. The next question is online from Marina Ukhapova, Nizhegorodskaya Pravda, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova9:10:40

Hello. The course of rate reductions has been in place for a year. What effect has this had on the lending market? Perhaps more accessible loans for business, mortgage availability, some new credit offerings?

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Elvira Nabiullina9:10:57

Yes, the reduction in the key rate has led to increased lending. We see this in market lending segments. For example, in four months — January through April — we issued almost four times more market-rate mortgages than in the same period last year. Corporate lending volumes have also grown for unsubsidized loans. And we regularly survey businesses and see that businesses are citing the lack of working capital financing less often as a major current difficulty. To be precise, the share of such enterprises has dropped to 10% — nearly 1.5 times less than before we started cutting rates. And we actually see now that the rate increase of a year ago, the high interest rates, were bitter but absolutely necessary medicine. A year ago, the key factor for businesses — according to the same surveys — was rising costs, essentially inflationary risks. Nearly every fourth company we surveyed complained about this. The intensity of this cost concern has declined — it hasn't gone away, but it's lower. Now one-fifth of companies mention it. And this is a direct consequence of inflation reduction resulting from tight monetary policy.

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Moderator9:12:54

Colleagues, please, Zulfia, I see your hand.

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Zulfia Khamitova9:12:59

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary assessment of GDP since the beginning of the year? And do you see any risks of overcooling the economy? And what key rate is needed in Russia for economic activity to grow at a higher pace? Thank you.

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Elvira Nabiullina9:13:15

By our estimates, overall in the first half of the year, the economy continues moderate growth, as I already mentioned. For the first quarter — that's Rosstat's assessment, you know it — GDP declined by 0.2%, but we said this was largely related to seasonal and calendar factors. April already brought GDP back into positive territory. And overall, we estimate economic growth for January-April at 0.3%. For the half-year, we expect around half a percentage point. According to operational data, overall business activity across the country is also growing in May. I already said we see acceleration in consumer activity. We don't see risks of overcooling the economy. Let me remind you — the main markers of overcooling that we use, and not only we but most economists everywhere, are inflation falling well below target, rising unemployment, and declining real incomes. None of these markers are present. And what protects the economy from this situation is balanced monetary policy. As for your question about what rate level is needed for the economy to grow rapidly — for sustainable high growth rates, it's not about the rate level. What's needed are mechanisms and institutions that stimulate the development of production capacity and increased labor productivity. This is primarily determined by the efficiency of using factors of production.

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Moderator9:15:15

Colleagues, please. Artem.

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Artem Gorun9:15:21

Good afternoon. Artem Gorun, Investfutcher. My question is about the labor market, which we've already touched on. We currently see unemployment remaining near historical minimums, but the picture is contradictory — large companies continue cutting staff, while the Ministry of Labor estimates about 7.5% of labor functions could be replaced by artificial intelligence in the near future. There seem to be contradictions. How do you assess these changes? Does this indicate labor market tension is easing — the one you've been expecting for so long? And how might this affect your overall assessment and rate decisions? Thank you.

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Elvira Nabiullina9:16:06

Indeed, there are certain signs of cooling in the labor market. But I noted that we see the pace of easing is decreasing. Looking at surveys, in recent months the share of enterprises experiencing workforce shortages hasn't declined for the past couple of months. And indeed, attention is often drawn to some workforce shedding and idle time at certain enterprises. These cases certainly attract attention. But the scale of this nationally is still not large and not growing. By our estimates, it's about 0.3% of all employed. There are layoffs, but the fact that unemployment isn't growing shows that where there were layoffs in some companies, workers are finding jobs elsewhere. As for artificial intelligence, we don't yet see a macroeconomic effect on the labor market. It doesn't yet play a determining role, though for individual companies it increases labor productivity when they skillfully use AI. The influence of this factor will increase over the years. But to give the most general point — the labor market is an important factor in rate decisions, but not the only one. We consider the full range of factors affecting the economy and inflation.

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Moderator9:17:58

Marina, please.

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Marina Pimionova9:18:02

Marina Pimionova, NTV, Business News. Continuing the topic of pressure on business, and a bit about sports. The FIFA World Cup is underway. In football, there's a concept called an own goal. Why hasn't the Central Bank been able to convince business — many financially literate people — that it's not scoring into the Russian economy's goal? Thank you.

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Elvira Nabiullina9:18:26

Yes, well, you know, we rather feel like a goalkeeper defending against inflation. And many matches are decided by the goalkeeper's reliability. Someone has to hold and protect those goalposts. Alexey Borisovich, anything to add?

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Alexey Borisovich9:18:54

I can only remind you of the Russia-Spain match in 2018. The result was decided in a penalty shootout thanks to the reliability of our goalkeeper.

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Moderator9:19:14

Colleagues, please, Nastya, second row.

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Anastasia Bashkatova9:19:19

Hello. Thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank present to the public as convincing proof of its monetary policy effectiveness? And the second part: given that achieving the 4% inflation target remains difficult, how does the Central Bank relate to proposals from experts to use not conventional consumer inflation but a different inflation cleaned of factors that since 2022 have strongly changed the economic situation — the special military operation in all its manifestations, stricter sanctions, and so on? Thank you.

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Elvira Nabiullina9:20:08

Thank you. You're absolutely right about convincing indicators. The criterion of truth, as is well known, is a fact. So let's look at the facts, including annual inflation. Year-on-year inflation over the last year has halved. This didn't happen by itself — it wasn't a fortunate coincidence. The circumstances were actually working in the opposite direction; pro-inflationary risks were materializing. And this is primarily the result of monetary policy. You're right that this effect is sometimes doubted. Perhaps someone forgets that the rate works with a lag. They think that when we have a high rate and high inflation, and we start lowering the rate, inflation comes down. But when we raised the rate, the effect acts over three to six quarters. And the fact that inflation has relatively slowed today is the merit of that high rate we maintained for a prolonged period, starting from 21%. If it were otherwise — we kept the rate at 21% for a long time — from October 2024 through the summer of last year, inflation started declining despite this. So the logic that high rates lead to growing inflation doesn't withstand criticism. When the rate was raised, inflation started declining after the peak in March of last year, in the spring. Seeing sustained inflation slowdown, we're lowering the rate. Now the important question: many experts suggest we not target overall inflation but rather underlying inflation, cleaned of everything that's growing. You can clean inflation any way you like. We show inflation figures cleaned of utility tariff growth, tourism services influence, and so on. We have many such indicators, but interest rates won't become lower because of this. If overall inflation is 10% and cleaned inflation is 2%, credit rates won't be 2% — they'll still be above 10%. So to get more moderate rates, we need to lower overall inflation. For people, it doesn't matter what's driving high inflation. Purchasing power of their savings and incomes is determined by overall price growth. We can say prices didn't rise for this thing, but they rose for everything else. So in our view, you can analyze any cleaned figures, but the target should be lowering overall inflation and overall price pressure.

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Alexey Borisovich9:22:15

Monetary policy cannot influence the root causes of inflation related to supply-side changes. But what it can do is bring demand into alignment with these circumstances, and then inflation will be low and rates moderate.

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Elvira Nabiullina9:22:26

We have many such cleaned indicators, but interest rates won't be lower because of them. If your overall inflation is 10% and your cleaned inflation is 2%, credit rates won't be 2% — they'll be above 10% in any case. So if we want more moderate rates, we need to reduce overall inflation. People don't care which component drives high inflation. Their purchasing power is determined by overall price growth. Analytically, you can look at any cleaned measures, but the focus must be on reducing overall inflation and price pressure.

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Moderator9:23:25

Yes, Alexey Borisovich.

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Alexey Borisovich9:23:27

It's clear that monetary policy cannot affect the root causes of inflation linked to supply-side changes. But what it can do is bring demand in line with these circumstances, and then inflation will be low and rates will be moderate.

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Moderator9:23:50

Colleagues, please. Dmitry.

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Dmitry Maroko9:23:54

Dmitry Maroko, Rossiya 24. This week the court rejected Euroclear's motion to suspend enforcement proceedings on the Central Bank's lawsuit. What does this mean in practice? Does it bring us closer to the return of frozen assets?

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Elvira Nabiullina9:24:10

I can probably only repeat the general formula, because we don't disclose details. Once again confirming that we don't disclose details or tactics — we will take all measures and use all legal means to protect our legitimate rights.

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Moderator9:24:31

Colleagues, please. Yakov.

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Yakov Timakov9:24:36

Good day. Yakov Timakov, Expert journal. Elvira Nabiullina, Alexey Borisovich. Not long ago, the Central Bank's actions were compared to the Volcker shock. Fed Chair Paul Volcker in the 1970s–80s was a proponent of tight monetary policy, resulting in stable low inflation on one hand and recession on the other. I'm not drawing direct parallels, since the Central Bank's arguments about sectoral decline are convincing. My question is about long-term consequences. After the Volcker shock came Reaganomics — tax cuts, deregulation, and strengthening of the dollar. The government is taking necessary measures, but restoring supply may take time. Rising gasoline prices could also affect inflation expectations, as it's a sensitive product for both people and companies. Additionally, there's been a reversal in fruit and vegetable price dynamics after an unusually strong decline in spring.

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Elvira Nabiullina9:25:53

Concluding the inflation topic, I want to note the statistical effect on annual inflation in coming months. In July, there will be no utility tariff increases — indexation has been moved to October, so annual inflation may temporarily dip, but it's just a redistribution of price growth within the year. On the economy: according to preliminary data, Q2 2026 economic activity is improving as expected. Temporary factors constraining growth early in the year have been exhausted. Construction is reviving after the cold winter, which was the main source of Q1 GDP decline. Overall H1 dynamics correspond to moderate output growth, but the situation varies greatly across sectors, and this heterogeneity has increased. Government demand is accelerating significantly, leaving less space for private demand expansion. Consumer activity continues moderate growth — car purchases picked up, services demand remains high. Wage growth supports consumption but has slowed, with companies planning more moderate indexation. Labor market tightness is declining slowly; in some regions, workforce shortage reduction has stalled. For sustainable cost and price pressure reduction, further convergence of wage growth and productivity is needed. Third, monetary conditions: interest rates in most financial segments continued declining, but long-term OFZ yields rose, reflecting growing term premium due to budget policy uncertainty. Most corporate loans are now at floating rates, so key rate cuts translate into immediate payment reductions. Savings rates remain high, household ruble deposits continue growing. In April–May, credit growth accelerated markedly — retail saw activation of unsecured lending, auto loans, and market-rate mortgages; corporate credit also grew significantly. This dynamics requires special attention: if credit acceleration proves sustained rather than a short-term spike, it may indicate current conditions are no longer perceived as restrictive. Budget policy's contribution to money supply growth remains elevated and will increase with revised parameters. If credit growth continues at such rates, it may require tighter policy than the baseline scenario. The combined budget and credit channel influence has pushed money supply growth to the upper bound of expectations, requiring greater tightness than built into our April forecast. On external conditions: the Middle East situation drove higher commodity prices, translating into accelerated inflation in many countries. Several central banks raised rates. For Russia, disinflationary effects have prevailed so far — higher commodity prices boosted export revenue and strengthened the ruble. Risks of conflict prolongation have decreased, but uncertainty remains. The risk balance has shifted more toward pro-inflationary. Budget parameter revision risk is essentially materializing. If budget policy's contribution grows at full resource capacity, monetary policy must play a stabilizing role. Workforce shortage and inflation expectation risks persist. On future decisions: current price growth has slowed noticeably, but risks of future acceleration are growing. Our decisions must be forward-looking. Neither further key rate cuts nor the adjustment size at each meeting are predetermined. We may need pauses to assess information and effects of previous decisions. Only a balanced approach under high uncertainty will achieve sustainable results and stabilize inflation at low levels.

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Moderator9:34:31

Thank you, colleagues. Please, your questions — don't forget to introduce yourselves and name your publication. Masha, please, front row.

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Maria Stepanova9:34:40

Good day. Maria Stepanova, Infogent. What rate options were considered today? You said further steps aren't predetermined, but has the probability increased that you'll use 0.25 again?

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Elvira Nabiullina9:34:58

A traditional question. This time, three rate options were specifically considered: leave at 14.5%, cut to 14.25%, or cut to 14% flat. All three appeared in economists' questions. There were weighty arguments for each, with significant support for each option. The final decision represents a balanced consideration of all arguments, including from the standpoint of type II error. Positions differed on three parameters: first, assessment of how sustainable observed inflation indicators are; second, the scale of additional pro-inflationary factors since the last meeting — budget plan shifts on the demand side, temporary fuel production cuts on the supply side; third, the degree of monetary condition tightness, important given credit growth acceleration in recent months. All participants noted that space for further rate cuts has narrowed, but the degree of narrowing will be discussed at the next meeting.

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Moderator9:37:06

Thank you. Nastya.

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Anastasia Saveleva9:37:11

Thank you. Anastasia Saveleva, Interfax. You've said space for further rate cuts has narrowed. How much did the budget factor influence this? Do you see risks that this space could shrink further due to the fuel market, which could have secondary effects — rising food prices, for example — and lead to increased inflation expectations?

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Elvira Nabiullina9:37:46

We generally assess reduced space for key rate cuts. This will be discussed in detail at the next key meeting. The factors' specific magnitudes are hard to measure, but pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it's important whether one-time disruptions transition into sustained price pressure, primarily through higher inflation expectations. Gasoline is a marker product — the June surveys don't show this yet. We'll examine July inflation expectation surveys before the next meeting, and see how this affects costs across a broad range of goods. This was indeed one of the main factors in reaching a balanced decision and reducing the rate cut step.

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Moderator9:39:03

Colleagues, please. Pavel.

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Pavel9:39:07

Thank you. Pavel, Vedomosti. In the press release you noted that a higher key rate trajectory may be needed. Does this apply to 2028?

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Elvira Nabiullina9:39:24

We'll present our new key rate trajectory outlook at the key meeting and assess what dynamics may be needed for 2026, 2027, and 2028. Changes will most likely primarily affect 2026–2027, but this needs recalculating. Yes, please, Alexey Borisovich.

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Alexey Borisovich9:39:48

Without pre-empting the July meeting, since the forecast is influenced by all factors — we must proceed from the assumption that if in 2028 budget policy continues not to be in a zero structural primary deficit mode, monetary policy most likely won't be fully neutral either, since it will need to compensate. We assess the neutral rate level annually before the main monetary policy directions. Specific figures can't be stated now, but by the next meeting there should be more certainty.

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Moderator9:40:55

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov9:41:00

Good day. Nikita Mitrofanov, Telegram channel Economic. I continue developing my macroeconomic model predicting your decisions. Today it predicted a 70% probability of a 0.5% cut and 30% of a 0.25% cut, mainly based on inflation data. My calculations were even worse than your press release, so reality was better — which for my model favored 0.5%. The 30% probability was due to persistent pro-inflationary expectations, low unemployment, and the new structural budget deficit factor. What influence does monetary policy have on money supply growth through the budget channel? It increasingly seems that policy primarily affects the private sector and less the budget channel.

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Elvira Nabiullina9:42:28

Our decisions primarily influence market credit growth rates, which is why we emphasize the share of subsidized loans, since they're largely insensitive to rate decisions. We primarily affect private credit. Monetary policy does influence the budget through internal debt servicing and subsidized programs where the budget absorbed significant interest rate risk. But overall, monetary policy doesn't directly impact the budget channel — rather, the government prepares budget decisions for priority tasks. At full resource capacity, the Central Bank plays a compensating role: taking budget channel money flows as given, we adapt policy so private credit doesn't pump excessive money into the economy, preventing inflation acceleration. The difficulty is that our decisions act with three-to-six-quarter lags. That's why we emphasize the need for earlier budget policy predictability.

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Moderator9:44:29

Thank you. The next question online is from Sergey Enquist, NGS55, Omsk. Has the Central Bank revised its key rate forecast after the St. Petersburg International Economic Forum stated it should be single-digit by year-end?

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Elvira Nabiullina9:44:50

No. First, we haven't revised the key rate forecast now — we revise it at key meetings, the next being in July. Our April forecast didn't presume single digits below 10% this year. Pro-inflationary risks have actually grown, so if the trajectory is revised, it would more likely be upward. Space for cutting by year-end and possibly next year has likely shrunk — not because we think aggregate demand needs additional cooling, we don't, but because government demand will contribute more in 2026–2027, so the private sector's contribution must be more restrained. Otherwise, demand stimulus simply translates into accelerated inflation. We cannot allow this — everyone loses, including businesses currently calling for faster cuts, because it would mean rising costs for them. With accelerating inflation, market rates won't fall — they'll rise. We listen to business experts and include their arguments in our discussions, but we make decisions based on independent analysis of a large volume of data — not just statistical and current data, but medium-term forecasts accounting for monetary policy lags.

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Moderator9:47:38

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov9:47:44

Evgeny Grachov, Izvestia. Where representatives of various agencies and businesses increasingly call for more active rate cuts, does the Bank of Russia experience additional pressure? Have regulators begun considering a broader spectrum of economic indicators, particularly those related to increased business risks?

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Elvira Nabiullina9:48:09

I already said we take expert and business opinions into account. Many voices call for rate cuts — they're understandable, not just from agencies but businesses. But we don't perceive this as pressure. We make decisions independently based on our own analysis. We've always considered a wide range of indicators — not just inflation and expectations, but the labor market and economic activity by sector and region. We pay special attention to business surveys; our regular monitoring of 15,000 enterprises is publicly available. Sometimes I hear the simplified notion that the Bank of Russia reduces everything to unemployment — that's absolutely not true. We look at many data points: temporary employment, downtime, resumes, vacancies, wage growth versus productivity, sectoral and regional breakdowns. Your question is important because decision-making requires using the full complex of economic data.

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Moderator9:50:06

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna9:50:11

Elena Fabrichna, Reuters. We're very glad to see you in good health. Your prolonged absence generated many rumors about personnel changes, about you wanting to leave. Can you refute them?

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Elvira Nabiullina9:50:28

I can only confirm that I had a cold and lost my voice for some time. The only thing I can say is to thank those who genuinely worried about my health.

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Moderator9:50:44

Colleagues, please, Georgy.

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Georgy Nedogibchenko9:50:48

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware whether LSR is participating in discussions on tightening budget rule parameters for 2027, with the cutoff price lowered to $50 per barrel? How would such parameters affect monetary policy?

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Elvira Nabiullina9:51:04

Our position hasn't changed. We consider the budget rule a fundamental basis for macroeconomic stability. The current base price is somewhat high from the standpoint of conservative long-term oil market trend estimates. In our view, it should be lowered to ensure long-term fiscal stability. The government will propose the cutoff level. With a lower base price under the budget rule, monetary policy will have greater foundations for macroeconomic stability and will account for this in our decisions. Alexey Borisovich, we have a good understanding of the progress of this discussion for current monetary policy decisions, while understanding what will happen with the budget rule in 2027.

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Moderator9:52:23

Thank you, colleagues, please. Yulia.

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Yulia Rostorgoeva9:52:28

Good day. Yulia Rostorgoeva, Market Power. The Iran conflict, according to US authorities, is over and oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and economy? How do you assess the three-month confrontation's medium-term impact on the Russian economy?

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Elvira Nabiullina9:52:51

When you speak of balance of payments risks from the conflict ending, you presumably mean oil prices may start falling. But these risks are neutralized by the budget rule's actions. We don't see significant risks from this standpoint. Overall, assessing the aggregate impact is still difficult — evaluating the conflict's consequences for the world economy and global inflation, even if finally resolved, is premature. It's already affected price growth and economic dynamics in many countries, which could influence Russia through future demand for our goods. So far the impact has been disinflationary — exporters' revenue grew, the exchange rate strengthened. But there are pro-inflationary effects too: rising logistics costs and higher import prices. We said the longer the conflict, the greater the pro-inflationary risks. Now we believe these risks are declining if the conflict is ending.

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Moderator9:54:29

Thank you. The next question online from Marina Ukhapova, Nizhny Novgorod Pravda. Marina, please ask your question.

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Marina Ukhapova9:54:38

Hello. The course of cutting the key rate has been maintained for a year. What effect has this had on the credit market — perhaps more accessible business loans, mortgage availability, new credit offerings?

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Elvira Nabiullina9:54:55

Yes, cutting the key rate led to credit growth, visible in market credit segments. In January–April, almost four times more market-rate mortgages were issued than in the same period last year. Corporate lending volumes also grew. We regularly survey businesses — they less frequently cite lack of working capital financing as a main difficulty, with that share dropping to 10%, nearly one and a half times less than before rate cuts began. A year ago, the key business concern was rising costs — inflation risks — with nearly every fourth company citing it. Now one in five mentions it, a direct consequence of inflation reduction through tight monetary policy.

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Moderator9:56:52

Colleagues, please, Zulfia, I see your hand.

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Zulfia Khamitova9:56:57

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary GDP estimate since the start of the year? Do you see risks of economic cooling, and what key rate is needed for higher economic growth rates?

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Elvira Nabiullina9:57:13

The economy continues moderate growth overall in H1. Q1 GDP declined 0.2%, largely due to seasonal and calendar factors; April brought GDP into positive territory. We estimate January–April growth at 0.3%, expecting around half a percentage point by half-year end. Preliminary data show business activity continued growing in May. We don't see overheating risks — the main markers (inflation falling below target, rising unemployment, declining real incomes) are all absent. Balanced monetary policy protects the economy from overheating. As for what rate level enables high growth — the question isn't about the rate level. What's needed are mechanisms and institutions stimulating productive capacity development and labor productivity growth, primarily determined by efficient use of production factors.

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Moderator9:59:13

Colleagues, please, Artem.

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Artem Gorun9:59:19

Good day. Artem Gorun, Investfutures. About the labor market: unemployment remains near historic lows, but the picture is contradictory — large companies continue cutting staff, while the Ministry of Labor estimates 7.5% of work functions could be replaced by AI soon. How do you assess these changes? Does labor market tightness — your long-awaited key factor — begin to ease? How might this affect rate decisions?

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Elvira Nabiullina10:00:04

There are certain signs of labor market cooling, but the pace of tightening reduction is slowing. The share of enterprises with workforce shortages hasn't declined in recent months. Workforce releases and idling at some enterprises attract attention, but their nationwide scale is still small — about 0.3% of all employed. Unemployment isn't rising, showing workers laid off in some companies find jobs elsewhere. Regarding AI, we don't yet see a macroeconomic labor market effect. It's not playing a determining role yet, though it increases productivity for companies using it effectively. Its influence will grow over years. The labor market is an important factor in rate decisions, but not the only one — we consider the full set of factors affecting the economy and inflation.

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Moderator10:01:56

Marina, please.

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Marina Pimionova10:02:00

Marina Pimionova, NTV Business News. Continuing the theme of business pressure and a bit about sports — the World Cup is on. In football there's the concept of an own goal. Why can't the Central Bank convince businesses and many financially literate people that it's not scoring goals against the Russian economy?

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Elvira Nabiullina10:02:24

We rather see ourselves as a goalkeeper defending against inflation. Many matches are decided by the reliability of goalkeepers. Someone has to hold and protect these goals. Alexey Borisovich, would you like to add?

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Alexey Borisovich10:02:52

I can only remind you of the Russia–Spain match in 2018. The result was decided in a penalty shootout thanks to the reliability of our goalkeeper.

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Moderator10:03:12

Colleagues, please, Nastya, second row.

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Anastasia Bashkatova10:03:17

Hello, thank you. Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank present as convincing evidence of monetary policy effectiveness? And secondly, given that achieving the 4% target still poses difficulties, how does the Bank regard proposals to calculate not the usual general consumer inflation, but inflation cleaned of factors that strongly changed the economic situation after 2022 — the special military operation factor and tougher sanctions?

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Elvira Nabiullina10:04:06

Thank you. On convincing indicators — the criterion of truth is fact. Annual inflation over the past year has halved. This didn't happen by itself — circumstances played in the other direction, with pro-inflationary risks materializing. This is primarily the result of monetary policy. But this effect is sometimes doubted — perhaps some forget that the rate works with a lag. When we raised the rate, the effect acts over three to six quarters. That inflation has relatively slowed today is thanks to the high rate maintained from 21%. With higher rates, inflation began declining after its peak last spring. Seeing sustained deceleration, we're cutting the rate. Now, many experts propose we focus not on overall inflation but on cleaned inflation — removing everything that's rising — and say then cut the rate. We can clean inflation any way we like: we show indicators cleaned of utility tariffs, tourism services, and so on. But interest rates won't be lower because of it. If overall inflation is 10% and cleaned inflation is 2%, credit rates won't be 2% — they'll be above 10% in any case. So if we want moderate rates, we need to reduce overall inflation. People don't care which component drives high inflation — their purchasing power is determined by overall price growth. So while any cleaned measures can be analyzed, the focus must be on reducing overall inflation and price pressure.

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Alexey Borisovich10:07:25

It's clear that monetary policy cannot affect the root causes of inflation linked to supply-side changes. But what it can do is align demand with these circumstances, and then inflation will be low and rates will be moderate.

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Elvira Nabiullina10:13:11

Most loans to companies, especially large and medium-sized ones, are now issued at floating rates. For such loans, a reduction in the key rate translates into a decrease in interest payments immediately and in full, not only for newly issued loans but also for existing ones.

The savings rate, although slightly declining, remains sufficiently high. Ruble deposits of the population in banks continue to grow. Among banking products, the popularity of savings accounts is increasing, and citizens' interest in investing in financial market instruments and non-financial instruments continues to rise.

In April-May, credit growth accelerated noticeably. In retail, there was an activation of unsecured and auto lending, as well as market-rate mortgage lending. The growth rate of corporate lending increased substantially.

The dynamics of monetary indicators currently require special attention from us. First, if the acceleration of lending proves to be a sustained trend rather than a short-term spike after low values at the beginning of the year, this may indicate that current monetary conditions are no longer perceived by borrowers as restrictive.

Second, the contribution of budget policy to the increase in money supply remains elevated, and given the revision of budget parameters, it will further exceed what we previously assumed.

If under these conditions lending continues at such high rates, it may require a tighter policy from us than was anticipated in the baseline scenario.

The combined impact through the budget and credit channels has already led to money supply growth running at the upper boundary of our expectations and even slightly above.

Given that our decisions affect the economy with certain lags, this already requires greater tightness from us than was built into our April forecast.

Now about external conditions. The situation in the Middle East has led to a rise in commodity prices. These changes have already begun translating into an acceleration of inflation in many countries. A number of central banks responded to the growth in pro-inflationary risks by raising rates. Global economic growth expectations are declining.

For the Russian economy, disinflationary effects have so far predominated. Higher commodity prices led to increased export revenue and ruble appreciation. Import demand also grew, but not as significantly as export volumes in value terms.

Risks of a prolonged Middle Eastern conflict have diminished, but uncertainty remains regarding the scale of its pro-inflationary consequences for the global economy. They could affect the Russian economy through prices of imported goods and logistical costs.

Moving on to risks overall. According to our assessments, their balance has shifted more strongly toward pro-inflationary. Regarding the risk of revising budget policy parameters, one can say it is essentially already materializing, but uncertainty about its scale remains.

Budget and monetary policy simultaneously affect the economy's demand. If the contribution of budget policy grows to achieve priority tasks, then monetary policy must play the role of a stabilizer, and its tightness should change accordingly to somewhat reduce the contribution of credit to aggregate demand. Only in this case can we avoid an upward deviation of demand from the economy's ability to expand supply and a new round of inflation.

Risks from labor shortages and inflation expectations remain. Pro-inflationary risks related to temporary supply reductions in certain sectors have increased. And I have already spoken about risks related to external conditions. A disinflationary risk remains the possibility of lower domestic demand dynamics compared to our baseline estimates.

Finally, about our future decisions. Current price growth rates have slowed noticeably, but we are noting a rise in risks that could lead to an acceleration of inflation in the future. Particularly important for us are those risks that may sustainably affect demand and prices over the medium term.

Monetary policy affects the economy and prices with certain lags. Therefore, our decisions must be forward-looking. I emphasize that neither further reductions in the key rate nor the size of the step at each specific meeting are predetermined.

We may need pauses to assess all incoming information and the effect of our previous decisions. Only maintaining a balanced approach, especially under conditions of high uncertainty, will allow us to achieve a sustainable result and stabilize inflation at a low level. Thank you for your attention.

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Moderator10:18:34

Thank you, colleagues. Please, your questions — and don't forget to introduce yourselves and name your publication. Masha, please, first row.

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Maria Stepanova10:18:44

Good day, Maria Stepanova, Informagent Stas. Which options were considered today? You already said that future steps are not predetermined, but has the probability increased that you would use a 0.25% cut again? Thank you.

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Elvira Nabiullina10:19:01

Thank you. A traditional question for us. Yes, this time three rate options were examined in a very specific manner: keeping at 14.5%, cutting 25 basis points to 14.25%, and cutting to 14.00%.

Incidentally, all these options appeared in the questions from economists. Each option had substantial arguments, and a considerable number of participants voiced their views. In my opinion, the final decision was indeed a balanced consideration of all arguments, including from the perspective of the cost of error.

If we generalize, one could say that participants' positions differed along three main parameters. First is the assessment of the degree of sustainability of the indicators of sustained inflation observed over recent months. We have indicators of sustained inflation — we need to understand how truly sustainable they are, the degree of that sustainability.

Second is the assessment of the scale of additional pro-inflationary factors that have emerged since the last board meeting. On the demand side, this is the shift in budget plans for 2026 and subsequent years, and on the supply side, including the temporary reduction in fuel production.

The third parameter is the assessment of the degree of tightness of monetary conditions. This is important in light of the significant acceleration of lending growth in the last 2-3 months. Practically all participants noted that room for further rate cuts has shrunk. But by how much it has shrunk was, and apparently will be, a subject of discussion at the next meeting.

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Moderator10:21:09

Thank you. Nastya, please.

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Anastasia Saveleva10:21:14

Saveleva, Anastasia, Interfax. You have already said that room for further rate cuts has shrunk. Could you say how much the budget factor influenced this? And do you see risks that this room could shrink further due to the situation on the fuel market, which could have secondary effects — rising prices for other goods such as food — and could lead to an increase in inflation expectations?

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Elvira Nabiullina10:21:48

We are assessing the reduction in room for key rate cuts. This will be discussed specifically at the next meeting, which is a key meeting. But the factors influencing this and their specific magnitudes are difficult to measure. We note, however, that pro-inflationary factors have strengthened their impact.

Regarding temporary supply-side factors, it is very important how the situation develops and whether these factors transition from one-off events into sustained price pressure, primarily through an increase in inflation expectations. Gasoline is a benchmark commodity. In the June surveys, this hasn't appeared yet. We will look at the July surveys on inflation expectations, which will be released before the next meeting.

It will also be important to see how this reflects on costs across a broad range of goods. These are factors that need to be assessed. I will say again that this was indeed one of the key factors in making the balanced decision and reducing the step in the rate cut.

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Moderator10:23:06

Colleagues, please. Pavel.

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Pavel10:23:11

Thank you. Pavel, Ver Dannym. I'd like to ask: in the press release you noted that a higher key rate trajectory may be required. Does this relate to 2028? Thank you.

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Elvira Nabiullina10:23:27

We will provide our updated view of the key rate trajectory, as I already said, at the key meeting, and assess the dynamics that may be required for 2026, 2027, and 2028. Most likely, the changes will primarily affect 2026-2027, but this will need to be reviewed and recalculated. Yes, please, Alexey Borisovich.

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Alexey Borisovich10:23:51

Without prejudging the July meeting — since the entire forecast is influenced by all factors, not just those that have changed to date — but we must proceed from the assumption that if in 2028 the budget policy is still not in a zero structural primary deficit mode, this would mean that monetary policy in 2028 will most likely not be fully neutral, because it will need to compensate for that. Ceteris paribus, including regarding how this budget policy change will affect the neutral rate assessment — we do this annually before presenting the main directions of monetary policy. So specific figures cannot be given now, but by the next meeting I think there will be more clarity on this matter.

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Moderator10:24:58

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov10:25:03

Good day. Nikita Mitrofanov, Telegram channel Economical. I continue to develop my macroeconomic model that tries to predict your decisions. Today the model predicted a 70% probability of a 0.5% cut and a 30% probability of a 0.25% cut. This was based mainly on calculated inflation data, and my estimates were even worse than yours in the press release — reality turned out better, so the model would have favored a 0.5% cut. But the 30% probability was because inflation expectations remain high, unemployment is low, and a new factor emerged — the structural deficit of the Russian Federation budget. In this context, I'd like to ask: what influence does monetary policy tightness have on money supply growth through the budget channel, since this is a factor that seems to affect primarily the private sector and to a lesser degree the budget channel?

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Elvira Nabiullina10:26:32

Naturally, our decisions primarily affect the pace of market lending. That is why we always emphasize the importance of subsidized lending, because subsidized loans are largely insensitive to our rate decisions. We primarily influence private credit. Our monetary policy does affect the budget through the budget's internal debt servicing costs, plus the subsidized programs where the budget has taken on significant interest rate risk. But overall, monetary policy does not have such a direct effect on the budget channel. Rather, it is the other way around — there are budget decisions being prepared by the government and adopted by the Duma to achieve priority tasks.

In this situation, when we have full employment of resources, the Central Bank plays a compensating role. We must, taking as given how much money flows through the budget channel, adapt our monetary policy so that through the private credit channel, the right amount of money enters the economy to prevent inflation from accelerating. The difficulty is also that our decisions act with a lag. Today's decisions will be reflected over three to six quarters. That is why we say that earlier predictability of budget policy is important.

So the interconnection exists, but it is rather such that we act as a stabilizer here.

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Moderator10:28:32

Thank you. The next question is online from Sergey Enkvist, publication NGS55, Omsk. Has the Central Bank revised its key rate forecast after the statements at the St. Petersburg International Economic Forum that it should become single-digit by year-end?

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Elvira Nabiullina10:28:53

No. First, I remind you that we are not currently revising our key rate forecast. We revise it at key meetings — the next one is in July when we generally revise the forecast. As for a single-digit rate, our April forecast did not envisage a key rate reduction to single-digit levels — that is, below 10% — this year.

I said that pro-inflationary risks have actually increased, and if the key rate trajectory forecast is revised, it would more likely be upward, not downward. And the room for reducing the key rate by the end of this year and possibly next year — the question about 2028 was also asked — has most likely shrunk.

Not because we believe additional cooling of aggregate demand is needed, but because government demand will make a larger contribution to demand and GDP growth in 2026 and 2027. And therefore, the private sector's contribution must be more restrained; otherwise there will be no additional GDP growth — all this demand stimulation will again lead to an acceleration of inflation.

We must not allow this, because everyone would lose — both the population and businesses. Even those now calling for accelerated rate cuts would face rising costs. With accelerating inflation, market rates will not fall — they will rise. Our task is to prevent this situation.

We certainly listen to and hear business experts, their arguments, including those expressed at the forum, and include them in the set of views we discuss at board meetings. But we make decisions based on our own independent analysis of a large volume of data — not just statistical and current data, but also a medium-term forecast of how the situation will develop, taking into account monetary policy lags.

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Moderator10:31:41

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov10:31:47

Evgeny Grachov, newspaper Izvestia. In conditions where representatives of various agencies and businesses increasingly speak of the need for more active key rate cuts, does the Bank of Russia face additional pressure regarding monetary policy? And have regulators, against the backdrop of these discussions, begun considering a broader range of economic indicators in decision-making, particularly those related to increased risks for business?

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Elvira Nabiullina10:32:13

I have already said that we certainly take into account the views of experts and businesses. There are many voices calling for rate cuts — they are quite understandable, not only from agencies but also from businesses. But we do not perceive this as pressure. I have said this many times — we make decisions independently based on our own analysis.

We have always considered and continue to consider a broad spectrum of indicators — not only inflation and inflation expectations, but also the labor market and economic activity, including by sector and by region. We pay special attention to business surveys. I remind you of our regular monitoring of 15,000 enterprises — you can familiarize yourself with the results. There is a lot of interesting data there, and we also conduct meetings with businesses.

Sometimes one hears a somewhat oversimplified notion, for example regarding the labor market, that the Bank of Russia reduces everything to unemployment. This is absolutely not the case. In my speeches and those of my colleagues, we always emphasize that we look at a large volume of data characterizing the labor market — temporary employment, downtime, resumes, vacancies, wage growth, how it relates to productivity, broken down by sector and region. So for each direction, this is a large list of data that we use.

And your question is indeed correct, because when making decisions, the full range of data characterizing the economic situation must be used.

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Moderator10:34:09

Thank you, colleagues. Elena Fabrichna.

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Elena Fabrichna10:34:14

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I can't help but ask — your prolonged absence gave rise to numerous rumors about personnel changes, about your wanting to leave. Can you refute them?

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Elvira Nabiullina10:34:31

I can only confirm that I indeed had a cold and lost my voice for some time. The only thing I can say is to thank those who sincerely worried about my health.

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Moderator10:34:47

Colleagues, please, Georgy.

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Georgy Nedogibchenko10:34:51

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of participants in discussions on tightening the budget rule parameters for 2027, with a reduction of the oil price cutoff to $50 per barrel? And how would such parameters affect monetary policy?

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Elvira Nabiullina10:35:11

Our position has not changed. First, we believe the budget rule is a fundamental basis for macroeconomic stability. The current base price is somewhat high from the perspective of a conservative assessment of long-term oil market trends, and in our view it should be reduced to ensure long-term fiscal stability of public finances and macroeconomic stability.

Of course, the government will propose the specific cutoff level. But at a lower base price under the budget rule, monetary policy will have a broader foundation for macroeconomic stability. Monetary policy will take this into account when we discuss our decisions. Alexey Borisovich, we have a good understanding within this discussion regarding current monetary policy decisions, understanding what will happen with the budget rule in 2027.

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Moderator10:36:23

Thank you, colleagues. Please, Yulia.

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Yulia Rostorgoeva10:36:31

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, if we believe U.S. authorities' statements, is concluded. Oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and the economy as a whole in such a scenario? And how do you assess the impact of this three-month confrontation on the Russian economy in the medium term?

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Elvira Nabiullina10:36:54

When you speak of risks for the balance of payments from the conclusion of the conflict, you probably mean that oil prices may begin to decline. But these risks are neutralized or compensated by the actions of the budget rule we discussed. So we probably do not see significant risks from this perspective.

As for the overall impact, it is probably still difficult to assess, because evaluating the consequences of the conflict for the global economy and global inflation — even if it is finally concluded — is still premature. We see that in many countries this has already affected price increases and economic dynamics, and this too could affect the Russian economy in terms of future demand for our goods.

So far the impact of this crisis has been disinflationary — because exporters' revenue increased and the exchange rate strengthened. But there are also pro-inflationary effects: rising logistical costs for our businesses and rising import prices. Pro-inflationary risks exist, but we said that the longer the conflict lasts, the greater the pro-inflationary risks. We now believe that pro-inflationary risks from this side are declining compared to what we previously thought.

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Moderator10:38:32

Thank you. The next question is online from Marina Ukhapova, newspaper Nizhegorodskaya Pravda, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova10:38:41

Hello. The course of reducing the key rate has been maintained for a year now. What effect has this had on the lending market? Perhaps more accessible loans for businesses, more affordable mortgages, or new credit offerings?

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Elvira Nabiullina10:38:59

Yes, the reduction in the key rate has led to an increase in lending. We see this in market lending segments. For example, in the four months of January-April, almost four times more market-rate mortgages were issued compared to the same period last year.

In corporate lending as well, non-subsidized lending volumes have grown. We regularly survey businesses and see that they have been mentioning the factor of insufficient funds for working capital financing less frequently as one of their main current difficulties. The share of such enterprises has dropped to 10%, which is almost one and a half times less than before we started cutting the rate.

We now see that the increase in the key rate a year ago — high interest rates — was a bitter but absolutely necessary medicine. A year ago, according to the same surveys, the key business factor was rising costs, essentially inflationary risks. At that time, nearly every fourth company we surveyed complained about it. Now that issue has diminished. Currently one in five companies mentions it, and this is a direct consequence of inflation reduction resulting from tight monetary policy.

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Moderator10:40:55

Colleagues, please, Zulfia, I see your hand.

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Zulfia Khamitova10:41:00

Hello, Zulfia Khamitova, Rinovosti. Do you have a preliminary GDP estimate for the year to date? And do you see any risks of economic cooling? What key rate does Russia need for economic activity to grow at a faster pace?

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Elvira Nabiullina10:41:16

According to our estimates, in the first half of the year the economy continues moderate growth. For the first quarter, this is Rosstat's estimate — GDP declined by 0.2%, but we said this was largely due to seasonal and calendar factors. April already brought GDP back into positive territory. Overall, we estimate January-April growth at 0.3%. By the end of the half-year, we expect around 0.5 percentage points. According to operational data, business activity across the country continues growing in May as well. I have already said we see an acceleration in consumer activity.

We do not see risks of economic cooling. I remind you that the main markers of cooling we use — and not just us, but most economists everywhere — are inflation falling well below target, rising unemployment, and a decline in real incomes. None of these markers are present. And protecting the economy from this situation is helped by balanced monetary policy.

Your question about what rate level is needed for the economy to grow at a faster pace — for the economy to grow sustainably at high rates, it is not about the rate level. What is needed are mechanisms and institutions that stimulate the development of productive capacity, increasing labor productivity. This is primarily determined by the efficiency of using factors of production.

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Moderator10:43:16

Colleagues, please. Artem.

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Artem Gorun10:43:22

Good day. Artem Gorun, Investfutures. My question is about the labor market, which we have already touched on. We see unemployment remains near historical lows, but the picture is contradictory because large companies continue reducing their staffs. At the same time, the Ministry of Labor estimates that about 7.5% of job functions may be replaced by artificial intelligence in the near future. There seem to be contradictions here. How do you assess these changes? Does this show that labor market tension, which you have long awaited as one of the key factors, is beginning to ease? And how might this affect your overall assessment and possible rate decisions?

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Elvira Nabiullina10:44:07

Indeed, there are certain signs of labor market cooling, but I noted that we see the pace of tension reduction is slowing. We see from surveys that in recent months, the share of enterprises experiencing labor shortages has not declined over the last couple of months.

People do note some workforce releases and downtime at certain enterprises. These cases certainly attract attention, but their scale nationwide is still small and not growing. By our estimates, this accounts for about 0.3% of all employed.

There are reductions, but the fact that unemployment is not growing shows that if there were cuts at some companies, workers are finding jobs at other companies. Regarding artificial intelligence, we do not yet see a macroeconomic effect on the labor market — it is not playing a determining role. For individual companies, it increases labor productivity when they use AI skillfully, and this factor's influence will grow over the years.

But the most important general point is that the labor market is an important factor in rate decisions, but not the only one. We take into account the full range of factors affecting the economy and inflation.

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Moderator10:45:59

Marina, please.

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Marina Pimionova10:46:03

Marina Pimionova, NTV, Delovye Novosti. Continuing the theme of business pressure and a bit about sports — the FIFA World Cup is underway. In football, there's a concept of an own goal. Why can't the Central Bank convince businesses — many financially literate people — that it is not scoring an own goal against the Russian economy?

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Elvira Nabiullina10:46:27

Well, you know, we probably feel more like a goalkeeper defending against inflation. Many matches are decided precisely by the reliability of goalkeepers, and someone has to protect those goals. Alexey Borisovich, would you like to add anything?

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Alexey Borisovich10:46:55

I can only remind you of the Russia-Spain match in 2018. Its result was decided in a penalty shootout thanks to the reliability of our goalkeeper.

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Moderator10:47:15

Colleagues, please, Nastya, second row.

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Anastasia Bashkatova10:47:20

Hello. Thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. What indicator could the Central Bank present to the public as convincing evidence of the effectiveness of its monetary policy? And second: given that achieving the 4% inflation target still poses difficulties, how does the Central Bank view proposals from a number of experts to calculate and account for a different inflation measure, stripped of the influence of factors that have significantly changed the economic situation since 2022 — in particular, the factor of the special military operation in all its manifestations, or stricter sanctions, and so on?

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Elvira Nabiullina10:48:09

Thank you. You are absolutely right about convincing indicators. The criterion of truth is, as they say, a fact. So let us look at the facts, including annual inflation. Year-on-year inflation over the last year has been cut in half. This did not happen by itself. It was not a fortunate coincidence. On the contrary, circumstances worked in the other direction — pro-inflationary risks materialized.

This is first and foremost the result of monetary policy. But why are you right that this effect is sometimes doubted? Perhaps some forget that the rate works with a lag. It seems to them: when the rate is high, inflation is high; then we start cutting the rate, and inflation comes down. But we need to understand that when we raised the rate, the effect operates over 3-6 quarters.

The fact that inflation has relatively slowed is of course a credit to the high rate we maintained for a prolonged period, starting from 21%. If it were otherwise — for example, if we had kept the rate at 21% for a sufficiently long time — that logic does not withstand scrutiny. Inflation began declining after the peak in March last year, even while the rate was being raised. Seeing sustained inflation deceleration, we are now cutting the rate.

Now an important question. Indeed, many experts suggest that we should not focus on headline inflation, on indicators of sustained inflation, but strip out everything that is rising and say: 'What remains, that's what doesn't grow — so cut the rate.' Monetary policy would be completely different.

You can clean up inflation however you like. We, by the way, show inflation indicators stripped of the impact of utility tariff increases, tourism services, and so on. But interest rates will not become lower because of this. If your overall inflation is 10%, let's say, and your cleaned-up inflation is 2%, lending rates will not be 2% — they will be above 10% in any case.

So if we want more moderate rates, we need to reduce overall inflation. It doesn't matter to people why inflation is high. The purchasing power of their savings and incomes is determined by the overall price increase across everything. Analytically, any adjustments can be examined, but we must focus on reducing overall inflation and price pressure. Yes, Alexey Borisovich?

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Alexey Borisovich10:51:28

Monetary policy cannot influence the root causes of inflation related to supply-side changes. But what it can do is bring demand into alignment with these circumstances, and then inflation will be low and rates will be moderate.

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Moderator10:51:51

Colleagues, please, Dmitry.

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Dmitry Maroko10:51:56

Dmitry Maroko, Rossiya 24. This week a court denied Euroclear's request to suspend enforcement proceedings related to the Central Bank's lawsuit. What does this mean in practice? Does this bring us closer to the return of frozen assets?

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Elvira Nabiullina10:52:12

Here I can probably only repeat the general formula, because we do not disclose details. I will confirm again that we do not disclose details, do not disclose tactics. We will undertake all measures and use all legal means to protect our legitimate rights.

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Moderator10:52:32

Colleagues, please. Yakov.

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Yakov Timakov10:52:37

Good day. Yakov Timakov, Expert magazine. Alexey Borisovich recently compared Elvira Nabiullina with Paul Volcker, the Fed Chairman in the 1970s-80s. Volcker, as is known, was a proponent of tight monetary policy, which resulted in sustained low inflation on one hand and recession on the other. I am not drawing direct parallels, since the Central Bank's arguments about sectoral decline sound convincing, and not everyone agrees with the recession thesis. My question is not about the current situation but about long-term consequences. After the Volcker shock in the U.S. came Reaganomics — tax cuts, deregulation. The government is taking necessary measures, but restoring supply may take time. The increase in gasoline prices could also affect inflation expectations, since fuel is a sensitive product for both people and companies.

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Elvira Nabiullina10:53:39

Besides, in recent weeks there has been a reversal in fruit and vegetable price dynamics after an unusually strong decline in the spring. We already see this in operational data. And to conclude on the topic of inflation, I want to draw attention to the statistical effect that will affect annual inflation indicators in the coming months.

In July there will be no utility tariff increases as last year — their indexation has been moved to October. This means annual inflation may temporarily decline slightly due to this factor, but it will only be a redistribution of price growth within the year.

Second — the economy. According to operational data, in the second quarter of 2026, as we expected, economic activity indicators are improving. Temporary factors that restrained it at the beginning of the year, including calendar and weather factors, have been exhausted or reversed. In particular, there is some revival in construction after a cold and snowy winter, which was the main source of the GDP decline in the first quarter.

If we analyze the overall economic dynamics for the first half of the year, it corresponds to moderate growth in goods and services output. At the same time, the situation varies greatly across sectors, and this heterogeneity has grown over the past year. It is largely linked to the structural restructuring of the economy.

If government demand growth accelerates substantially, room for expanding private demand — investment and consumer — in conditions of limited resources becomes smaller. A certain contribution to the intensification of sectoral heterogeneity is also made by shorter-term factors, such as commodity market dynamics and temporary shutdowns of certain manufacturing capacities.

As for consumer activity, its moderate growth continues. In the spring months, car purchases accelerated. Demand in the services segment remains high.

Consumption is supported by wage growth. At the same time, it has slowed somewhat, and enterprises in their plans are building in more moderate indexations going forward. Moreover, there is a fairly wide dispersion in wage dynamics across sectors and types of activity, reflecting the heterogeneity I mentioned. Overall, labor market tension is declining slowly. According to our territorial offices' information, in several regions the reduction in labor shortages has stalled in recent months.

Under these conditions, for a sustainable reduction in cost and price pressure, further convergence of wage growth and productivity is necessary. I want to emphasize that to increase productivity, first and foremost it is required that labor be utilized to the maximum where it brings the greatest return for the economy.

Third — monetary conditions. Interest rates in most segments of the financial market continued to decline gradually under the influence of previous monetary policy decisions. At the same time, long-term OFZ yields grew slightly, reflecting an increase in the term premium linked to uncertainty about budget policy.

I want to note that most loans to companies, especially large and medium-sized ones, are now issued at floating rates, and for such loans, key rate reductions translate into lower interest payments immediately and in full, not only for new loans but also existing ones.

The savings rate, although slightly declining, remains sufficiently high. Ruble deposits of the population in banks continue to grow. Among banking products, the popularity of savings accounts is increasing, and citizens' interest in financial market instruments and non-financial instruments continues to rise.

In April-May, credit growth accelerated noticeably. In retail, there was an activation of unsecured and auto lending, as well as market-rate mortgage lending. The growth rate of corporate lending increased substantially. The dynamics of monetary indicators currently require special attention from us.

First, if the acceleration of lending proves to be a sustained trend rather than a short-term spike after low values at the beginning of the year, this may indicate that current monetary conditions are no longer perceived by borrowers as restrictive.

Second, the contribution of budget policy to the increase in money supply remains elevated, and given the revision of budget parameters, it will further exceed what we previously assumed. If under these conditions lending continues at such high rates, it may require a tighter policy from us than was anticipated in the baseline scenario.

The combined impact through the budget and credit channels has already led to money supply growth running at the upper boundary of our expectations and even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightness from us than was built into our April forecast.

Now about external conditions. The situation in the Middle East has led to a rise in commodity prices. These changes have already begun translating into an acceleration of inflation in many countries. A number of central banks responded to growing pro-inflationary risks by raising rates. Global economic growth expectations are declining.

For the Russian economy, disinflationary effects have so far predominated. Higher commodity prices led to increased export revenue and ruble appreciation. Import demand also grew, but not as significantly as export volumes. Risks of a prolonged Middle Eastern conflict have diminished, but uncertainty remains about the scale of its pro-inflationary consequences for the global economy. They could affect the Russian economy through prices of imported goods and logistical costs.

Moving on to risks overall. According to our assessments, their balance has shifted more strongly toward pro-inflationary. Regarding the risk of revising budget policy parameters, one can say it is essentially already materializing, but uncertainty about its scale remains.

Budget and monetary policy simultaneously affect the economy's demand. If the contribution of budget policy grows to achieve priority tasks, then monetary policy must play the role of a stabilizer, and its tightness should change accordingly to somewhat reduce the contribution of credit to aggregate demand. Only in this case can we avoid an upward deviation of demand from the economy's ability to expand supply and a new round of inflation.

Risks from labor shortages and inflation expectations remain. Pro-inflationary risks related to temporary supply reductions in certain sectors have increased. And I have already spoken about risks related to external conditions. A disinflationary risk remains the possibility of lower domestic demand dynamics compared to our baseline estimates.

Finally, about our future decisions. Current price growth rates have slowed noticeably, but we are noting a rise in risks that could lead to an acceleration of inflation in the future. Particularly important for us are those risks that may sustainably affect demand and prices over the medium term. Monetary policy affects the economy and prices with certain lags, so our decisions must be forward-looking.

I emphasize that neither further reductions in the key rate nor the size of the step at each specific meeting are predetermined. We may need pauses to assess all incoming information and the effect of our previous decisions. Only maintaining a balanced approach, especially under conditions of high uncertainty, will allow us to achieve a sustainable result and stabilize inflation at a low level. Thank you for your attention.

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Moderator11:02:37

Thank you, colleagues. Please, your questions — and don't forget to introduce yourselves and name your publication. Masha, please. First row.

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Maria Stepanova11:02:47

Good day, Maria Stepanova, Informagent Stas. Which options were considered today? You already said that future steps are not predetermined, but has the probability increased that you would use a 0.25% cut again?

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Elvira Nabiullina11:03:04

Thank you. A traditional question for us. This time three rate options were examined in a very specific manner: keeping at 14.5%, cutting 25 basis points to 14.25%, and cutting to 14.00%. Incidentally, all these options appeared in the questions from economists.

Each option had substantial arguments, and a considerable number of participants voiced their views. In my opinion, the final decision was indeed a balanced consideration of all arguments, including from the perspective of the cost of error. If we generalize, participants' positions differed along three main parameters.

First is the assessment of the degree of sustainability of the indicators of sustained inflation observed over recent months. We need to understand how truly sustainable they are, the degree of that sustainability.

Second is the assessment of the scale of additional pro-inflationary factors that have emerged since the last board meeting. On the demand side, this is the shift in budget plans for 2026 and subsequent years, and on the supply side, including the temporary reduction in fuel production.

At today's board of directors meeting, three parameters were discussed. On the demand side, there is a shift in budget plans to 2026 and subsequent years. On the supply side, there are restrictions, including a temporary reduction in fuel production. The third parameter is an assessment of the degree of tightness of monetary conditions. This is important in light of the significant acceleration in lending growth over the past two to three months. Virtually all participants noted that the room for further rate cuts has narrowed. To what extent it has narrowed was, and apparently will be, a subject of discussion at the next meeting.

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Moderator11:05:12

Thank you. Nastya, please.

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Anastasia Saveleva11:05:17

Anastasia Saveleva, Interfax. You already said that the room for further rate cuts has narrowed. Could you say how much the budget factor has influenced this? And do you see risks that this room could shrink further due to the situation in the fuel market, which could have secondary effects — rising prices for other goods, such as food, and could lead to rising inflation expectations?

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Elvira Nabiullina11:05:51

We generally assess that the room for cutting the key rate has decreased. This will be discussed in detail at the next meeting, which is a structural meeting. As for the factors influencing this, it is difficult to measure their specific values, but we note that pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it is very important how the situation develops and whether these factors transition from one-off events into sustained price pressure, primarily through rising inflation expectations. It is clear that gasoline is a marker product, and the June surveys do not yet reflect this. We will look at the July surveys on inflation expectations, which will be released before the next meeting. It will also be important to see how this affects costs across a wide range of goods. So these are factors that need to be assessed. I will say again that this was indeed one of the main factors in taking a balanced decision to reduce the step of the rate cut.

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Moderator11:07:09

Colleagues, please. Pavel.

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Pavel11:07:15

Thank you. I wanted to ask: in the press release you noted that a higher trajectory of the key rate may be required. Does this apply to 2028? Thank you.

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Elvira Nabiullina11:07:30

We will present our new view of the key rate trajectory, as I already said, at the structural meeting, and we will assess the dynamics that may be required for 2026, 2027, and 2028. But most likely, changes will mainly affect 2026 and 2027. However, this will need to be reviewed and recalculated. Yes, please, Alexey Borisovich.

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Alexey Borisovich11:07:54

Without anticipating the July meeting — because all factors affect the entire forecast, not just those that have changed at this moment — we must proceed from the assumption that if in 2028 budget policy remains outside the regime of a zero structural primary deficit, this will mean that monetary policy will most likely not be fully neutral in 2028, because it will have to compensate for that. Again, all else being equal, including how this change in budget policy will affect the neutral rate level — we assess this annually before presenting the main directions of monetary policy. So specific figures cannot be named now, but by the next meeting, I think there will be more clarity on this matter.

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Moderator11:09:01

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov11:09:06

Good day. Nikita Mitrofanov, Telegram channel Economic. I continue to develop my macroeconomic model that tries to predict your decisions. Today, the model predicted a 70% probability of a 0.5% rate cut and a 30% probability of a 0.25% cut. The model's prediction was mainly based on calculated inflation data, and my data was actually worse than yours in the press release — reality turned out better. The 30% probability was due to the fact that pro-inflationary expectations among the population remain quite high, unemployment is low, and a new factor has emerged — the structural budget deficit of the Russian Federation. In this context, I would like to ask: what influence does monetary policy and its tightness have on money supply growth through the budget channel, since this is a factor that affects things, but it seems monetary policy primarily affects the private sector and less the budget channel. Thank you.

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Elvira Nabiullina11:10:35

Naturally, we primarily influence the pace of lending growth, above all market lending. That is why we always emphasize the importance of the share of subsidized loans, because subsidized loans are largely insensitive to our rate decisions. Our monetary policy does affect the budget because the government has internal debt and debt servicing costs. Plus the subsidized programs where the budget has taken on a significant portion of the interest rate risk. But overall, monetary policy does not have a direct influence on the budget channel. Rather, it is the other way around: there are government decisions being prepared, and the Duma is adopting them to fulfill priority tasks. In a situation where resources are fully utilized, the Central Bank plays a compensating role. That is, taking as given how much money flows through the budget channel, we must adapt our monetary policy so that the private credit channel does not pump too much money into the economy and inflation does not accelerate. The difficulty is also that our decisions act with a lag — I mentioned this lag. Today's decisions will take effect over three to six quarters. That is why we emphasize the importance of earlier predictability of budget policy.

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Moderator11:12:35

Thank you. Next question online from Sergey Enkvia, publication NGS55, Omsk. Has the Central Bank revised its key rate forecast after statements at the St. Petersburg International Economic Forum that the rate should become single-digit by year-end?

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Elvira Nabiullina11:12:57

No. First, let me remind you that we are not revising the key rate forecast now. We revise it at structural meetings; the next one will be in July. Our April forecast did not assume bringing the key rate to single-digit levels — below 10% — this year. I said that pro-inflationary risks have even increased, and if the key rate trajectory forecast is revised, it will be more likely upward, not downward. The room for cutting the key rate by year-end and perhaps into next year — the question about 2028 was also raised — has most likely shrunk. Not because we believe additional cooling of aggregate demand is needed, but because government demand will make a larger contribution to demand and GDP growth in 2026 and 2027, and therefore the private sector's contribution must be more restrained. Otherwise, there will be no additional GDP growth, and all this demand stimulation will simply lead to accelerating inflation. We must not allow this, because everyone loses: both the population and businesses. Even those currently asking for faster rate cuts — it will mean rising costs for them. And with accelerating inflation, market rates will not fall; they will rise. Therefore, our task is to prevent this situation. We listen to and hear business experts, including the arguments made at the forum, and include them in the list of opinions we discuss at the board of directors. But the decision is made on the basis of our own independent analysis of data.

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Moderator11:15:44

Thank you, colleagues. Please, Evgeny, last row.

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Evgeny Grachov11:15:50

Evgeny Grachov, Izvestia newspaper. In conditions where representatives of various agencies and businesses increasingly speak about the need for more active rate cuts, does the Bank of Russia face additional pressure on monetary policy issues? And have regulators begun to account for a wider range of economic indicators when making decisions, particularly related to increased risks for businesses? Thank you.

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Elvira Nabiullina11:16:16

I have already said that we certainly take into account the opinions of experts and businesses. Yes, many voices call for rate cuts, and they are quite understandable. We do not perceive this as pressure. I have said this repeatedly. The decision is made independently on the basis of our own analysis. We have always accounted for and continue to account for a wide range of indicators — not just inflation and inflation expectations, but also the labor market and economic activity, including by sector and region. We pay particular attention to business surveys. I remind you of our regular monitoring of 15,000 enterprises; the results are publicly available. Sometimes I hear a simplified notion that the Central Bank reduces everything to unemployment — that is absolutely not so. We look at a large number of data characterizing the labor market situation: temporary employment, downtime, resumes, vacancies, wage growth rates, how they relate to productivity, in sectoral and regional breakdowns. So for each direction, this is a large set of data that we use.

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Moderator11:18:12

Thank you, colleagues. Lena Fabrichna.

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Elena Fabrichna11:18:17

Elena Fabrichna, Reuters agency. We are very glad to see you in good health. I cannot help but ask — your prolonged absence generated many rumors about personnel changes, about you wanting to leave. Can you refute them?

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Elvira Nabiullina11:18:32

Thank you. I can only confirm that I did have a cold and temporarily lost my voice. The only thing I can say is to thank those who sincerely worried about my health.

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Moderator11:18:50

Colleagues, please, Georgy.

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Georgy Nedogibchenko11:18:54

Georgy Nedogibchenko, RBC. Is the Bank of Russia aware of, or participating in, discussions about tightening the parameters of the budget rule for 2027, with a reduction in the cutoff price to $50 per barrel? And how would such parameters affect monetary policy? Thank you.

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Elvira Nabiullina11:19:14

Our position has not changed here. First, we believe the budget rule is a fundamental basis for macroeconomic stability. The current base price is somewhat high from the standpoint of a conservative assessment of long-term trends in the oil market. In our view, it should be lowered to ensure long-term fiscal stability and macroeconomic stability. The government will propose the cutoff level, but I should note that with a lower base price for the budget rule, monetary policy — this will mean a more solid foundation for macroeconomic stability. Monetary policy will take this into account when we discuss our decision. Alexey Borisovich, we have a good understanding of how this discussion is progressing in terms of making monetary policy decisions now, understanding what will happen with the budget rule in 2027.

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Alexey Borisovich11:20:14

We have a good understanding of the progress of this discussion in terms of making monetary policy decisions now, understanding what will happen with the budget rule in 2027. Thank you.

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Moderator11:20:29

Colleagues, please. Yulia.

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Yulia Rostorgoeva11:20:34

Good day. Yulia Rostorgoeva, Market Power. The Iranian conflict, if we believe U.S. authorities' statements, is ending. Oil is getting cheaper. What risks do you see for the Russian budget, balance of payments, and economy in general in this scenario? And how do you assess the impact of this three-month clash on the Russian economy in the medium term? Thank you.

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Elvira Nabiullina11:20:57

When you speak of risks to the balance of payments from the end of the conflict, you probably mean that oil prices may start falling. But these risks are neutralized or compensated by the actions of the budget rule, which we discussed. Therefore, we do not see significant risks from this point of view. As for the overall impact, it is probably still difficult to assess, because it is too early to evaluate the consequences of the conflict for the world economy and world inflation if it is finally ended. We see that in many countries it has already affected price increases and economic dynamics, which could also affect the Russian economy through future demand for our goods. So far, the impact of this crisis has been disinflationary because exporters' revenue grew and the ruble strengthened. But there are also pro-inflationary effects: rising logistics costs for our businesses and rising import prices. We said that the longer the conflict, the greater the pro-inflationary risks. We now believe that if the conflict ends, these risks will decrease from that side compared to what we thought earlier.

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Moderator11:22:35

Thank you. Next question online from Marina Ukhapova, Nizhegorodskaya Pravda, Nizhny Novgorod. Marina, please ask your question.

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Marina Ukhapova11:22:45

Hello. The course toward rate cuts has been maintained for a year. What effect has this had on the lending market? Perhaps affordable loans for businesses, mortgage availability, new credit offerings?

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Elvira Nabiullina11:23:02

Yes, the rate reduction has led to increased lending, and we see this in market lending segments. For example, in four months — January through April — nearly four times as much market mortgage lending was issued as in the same period last year. Corporate lending volumes have also grown. We regularly survey businesses and see that companies are less frequently citing a lack of funds for working capital financing among their main current difficulties. Specifically, the share of such enterprises has fallen to 10%, which is almost 1.5 times less than before we started cutting the rate. The rate hikes of a year ago, high interest rates, were a bitter but absolutely necessary medicine. A year ago, the key concern for businesses, according to the same surveys, was rising costs — essentially inflationary risks. Then, practically every fourth company we surveyed complained about this. Now that concern has decreased. Currently one-fifth of companies mention it. This is a direct consequence of lower inflation resulting from tight monetary policy.

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Moderator11:24:58

Colleagues, please. Zulfia, I see your hand.

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Zulfia Khamitova11:25:03

Hello, Zulfia Khamitova, RIA Novosti. Do you have a preliminary assessment of GDP since the beginning of the year? And do you see risks of the economy overheating cooling? And what key rate does Russia need for economic activity to grow at a higher pace? Thank you.

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Elvira Nabiullina11:25:19

By our estimates, overall in the first half of the year the economy continues to grow moderately. I already mentioned this. According to Rosstat, GDP in the first quarter decreased by 0.2%, but we said this was largely due to seasonal and calendar factors. April already brought GDP back into positive territory. Overall, we assess January-April GDP growth at 0.3%. By the end of the half-year, we expect around half a percentage point. According to preliminary data, business activity across the country continues to grow in May. We also see an acceleration in consumer activity. We do not see risks of economic overheating. I remind you of the main markers of overheating that we and most economists use: inflation falling well below target, rising unemployment, and falling real incomes. None of these markers are present. What helps protect the economy from overheating is balanced monetary policy. As for what rate level is needed for the economy to grow rapidly — for the economy to grow sustainably at a high pace, it is not a matter of the rate level. We need mechanisms and institutions that stimulate the development of production capacities and increase labor productivity. This is primarily determined by the efficiency of using factors of production.

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Moderator11:27:19

Colleagues, please, Artem.

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Artem Gorun11:27:25

Good day. Artem Gorun, Investfuture. I have a question about the labor market, which we have already touched upon. We see unemployment remains near historical lows, but the picture is contradictory, because large companies continue to reduce their staffs, while the Ministry of Labor estimates that about 7.5% of labor functions could be replaced by artificial intelligence in the near future. How do you assess these changes? Does this show that labor market tension is starting to ease, which you awaited for so long, calling it one of the main factors? And how might this affect your overall assessment and possible rate decisions? Thank you.

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Elvira Nabiullina11:28:10

Indeed, there are certain signs of cooling in the labor market, but the pace of the decline in tension is slowing. We see from surveys that in recent months, the share of enterprises experiencing a shortage of workers has not decreased over the past couple of months. There is attention to certain staff releases and layoffs at some enterprises. These cases attract attention, but nationally the scale is still small and not growing — by our estimates about 0.3% of all employed. The fact that unemployment is not rising shows that where there were layoffs in some companies, workers are finding jobs in others. As for artificial intelligence, we do not yet see a macroeconomic effect on the labor market. It does not yet play a determining role. For individual companies that effectively use AI, it increases labor productivity. Its impact will likely grow over the years. I want to emphasize that the labor market is an important factor in rate decisions, but not the only one. We take into account the full set of factors affecting the economy and inflation.

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Moderator11:30:02

Marina, please.

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Marina Pimionova11:30:06

Marina Pimionova, NTV, Business News. Continuing the theme of business pressure and a bit about sports. The FIFA World Cup is currently underway. In football, there is a concept called an own goal — a goal scored against your own team. Why can't the Central Bank convince businesses, many financially literate people, that it is not scoring an own goal against the Russian economy? Thank you.

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Elvira Nabiullina11:30:30

Yes, well, you know, we rather feel like a goalkeeper defending against inflation. And many matches are decided by the reliability of goalkeepers. Someone has to guard those gates. Alexey Borisovich, anything to add?

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Alexey Borisovich11:30:58

I can only remind you of the Russia-Spain match in 2018. The result was decided in a penalty shootout thanks to the reliability of our goalkeeper.

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Moderator11:31:18

Colleagues, please, Nastya, second row.

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Anastasia Bashkatova11:31:23

Hello. Thank you very much. Anastasia Bashkatova, Nezavisimaya Gazeta. Please tell me, what indicator could the Central Bank now present to the public as convincing evidence of the effectiveness of its monetary policy? And the second part of the question: given that achieving the 4% inflation target still poses difficulties, how does the Central Bank view proposals from a number of experts to calculate and account for monetary policy not using the traditional general consumer inflation, but a different inflation cleaned of factors that significantly changed the economic situation after 2022, in particular, the special military operation in all its manifestations or the factor of stricter sanctions? Thank you.

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Elvira Nabiullina11:32:12

Thank you. You are absolutely right about persuasive indicators. The criterion of truth, as you know, is a fact. Let us look at the facts, including year-over-year inflation. Inflation over the past year has halved. This did not happen by itself; it is not a happy coincidence. The circumstances, as you see, played in the opposite direction — pro-inflationary risks materialized. This is primarily the result of monetary policy. But why you are right — this effect is sometimes questioned. Possibly someone forgets that the rate works with a lag. It seems to them: high rate, high inflation; we start cutting, and inflation falls. But when we raised the rate, the effect operates over three to six quarters. The fact that inflation has slowed down relatively today is, of course, thanks to that high rate that we maintained for a long time, starting from 21%. The logic that raising the rate leads to higher inflation does not withstand criticism. After the rate increase, inflation began declining after its peak last spring. And seeing sustained disinflation, we are cutting the rate. Now, the important question: many experts propose that we not rely on general inflation indicators but on persistent inflation cleaned of everything that is rising, and then cut the rate. One can clean inflation however one likes. We do show indicators cleaned of utility tariff growth, tourism services, and so on. But interest rates will not become lower because of that. If overall inflation is 10%, even if cleaned inflation is 2%, lending rates will still be above 10%. Therefore, to have more moderate rates, we need to reduce overall inflation. For people, it does not matter what drives inflation. The purchasing power of their savings and incomes is determined by general price growth across the board. Analytically, one can look at any cleaned indicators, but the target must be reducing overall inflation and price pressure.

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Alexey Borisovich11:35:29

It is clear that monetary policy cannot influence the root causes of inflation related to supply-side changes. But what can it do? It can bring demand into alignment with these circumstances, and then inflation will be low and rates will be moderate.

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Moderator11:35:55

Colleagues, please, Dmitry.

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Dmitry Maroko11:35:59

Dmitry Maroko, Rossiya 24. This week the court denied Uralkali's request to suspend enforcement proceedings in the lawsuit against the Central Bank. What does this mean in practice? Does it bring us closer to the return of frozen assets? Thank you.

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Elvira Nabiullina11:36:15

I can probably only repeat the general formula here, since we do not disclose details. Let me confirm again: we do not disclose details or tactics. We will take all measures and use all legal means to protect our lawful rights.

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Moderator11:36:35

Colleagues, please. Yakov.

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Yakov Timakov11:36:40

Good day. Yakov Timakov, Expert journal. Elvira Nabiullina and Alexey Borisovich. Recently, the head of the Bank of Russia has been compared to Paul Volcker. The Fed chair in the 1970s-80s was, as you know, a proponent of tight monetary policy, resulting in sustained low inflation on one hand and recession on the other. I am not drawing direct parallels now, since the Central Bank's arguments about sectoral decline sound convincing, and not everyone agrees with the thesis of recession in the Russian economy. My question is not about the current situation but about long-term consequences.

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Elvira Nabiullina11:37:28

Let me start with fuel prices. The government is taking necessary measures, but restoring supply may take time. Fuel price increases may also affect inflation expectations, since gasoline is a sensitive product for both people and companies. Moreover, in recent weeks there has been a reversal in fruit and vegetable price dynamics after a atypically strong decline in the spring. We already see this in operational data. Concluding on the topic of inflation, I want to draw attention to a statistical effect that will affect year-over-year inflation figures in the coming months. In July there will be no utility tariff increases, as happened last year — their indexation has been postponed to October. This means year-over-year inflation may temporarily decline slightly due to this factor, but it will only be a redistribution of price growth within the year. On the economy: according to operational data, in the second quarter of 2026, as we expected, economic activity indicators are improving. Temporary factors that constrained activity at the beginning of the year, including calendar and weather factors, have been exhausted or reversed. In particular, there is some revival in construction after a cold and snowy winter, which was the main source of the GDP decline in the first quarter. If we analyze overall economic dynamics for the first half of the year, it corresponds to moderate growth in goods and services output. At the same time, the situation across sectors differs greatly, and this heterogeneity has increased over the past year. This is largely due to structural restructuring. If government demand accelerates significantly, the room for expanding private demand — both investment and consumer — becomes smaller in conditions of limited resources. A certain contribution to strengthening sectoral heterogeneity is also made by shorter-term factors such as commodity market conjuncture and temporary removal of individual processing capacities. As for consumer activity, its moderate growth continues. In spring months, automobile purchases activated. Demand in the services segment remains high. Consumption is supported by wage growth, though it has somewhat slowed, and enterprises plan increasingly moderate future indexations. There is also a sufficiently wide dispersion in wage dynamics by sectors and types of activity, reflecting the economic heterogeneity I mentioned. Overall, labor market tension is declining slowly. According to information from our territorial institutions, in a number of regions, the reduction in worker shortages has stalled in recent months. In these conditions, for sustainable reduction in cost and price pressure, further convergence of wage growth and productivity is needed. I want to emphasize that to increase productivity, workers must be maximally deployed where they bring the greatest return to the economy. Third — monetary conditions. Interest rates in most financial market segments continued to decline smoothly under the influence of previous monetary policy decisions. At the same time, long-term OFZ yields grew somewhat, reflecting rising term premium related to uncertainty about budget policy. I want to note that most loans to companies, especially large and medium ones, are now issued at floating rates, and rate cuts translate into reduced interest payments immediately and in full, both for new loans and existing ones. The savings rate, although slightly declining, remains quite high. Ruble deposits in banks continue to grow. Among banking products, savings accounts are becoming more popular, and citizens' interest in financial market instruments and non-financial instruments continues to rise. In April-May, credit growth accelerated noticeably. In retail, unsecured lending, auto lending, and market-rate mortgage lending were activated. Corporate credit growth rates increased significantly. The dynamics of monetary indicators now require special attention. First, if the acceleration of lending proves to be a sustainable trend rather than a short-term spike after low early-year values, this may indicate that current monetary conditions are no longer perceived by borrowers as restrictive. Second, the budget policy's contribution to money supply growth remains elevated, and given the revision of budget parameters, it will be even more than previously assumed. If credit growth continues at such high rates under these conditions, it may require tighter policy than assumed in the base scenario. The combined impact through the budget and credit channels has already led to money supply growth at the upper bound of our expectations, and even slightly above. Given that our decisions affect the economy with certain lags, this already requires greater tightness than was built into our April forecast. Now on external conditions. The situation in the Middle East has led to higher commodity prices. These changes have already begun translating into accelerating inflation in many countries. A number of central banks responded to rising pro-inflationary risks by raising rates. Growth expectations for the world economy are declining. For the Russian economy, disinflationary effects have so far prevailed. Higher commodity prices led to increased export revenue and ruble strengthening. Import demand also grew, but not as significantly as export value. The risk of a prolonged Middle Eastern conflict has declined, but uncertainty remains about the scale of its pro-inflationary consequences for the world economy. These may affect the Russian economy through imported goods prices and logistics costs. Moving to risks generally: by our estimates, their balance has shifted more strongly toward pro-inflationary. Regarding the risk of revising budget policy parameters, one can say it has essentially already materialized, but uncertainty remains about its scale. Budget and monetary policy simultaneously affect economic demand. If the budget policy's contribution grows to implement priority tasks, monetary policy must play a stabilizer role, and its tightness must change to somewhat reduce the credit contribution to aggregate demand. Only in this case can we avoid demand deviating upward from the capacity to increase supply and another wave of inflation. Risks from labor shortages and inflation expectations remain. Pro-inflationary risks related to temporary supply reduction in individual sectors have risen. I already spoke about external condition risks. The disinflationary risk remains lower domestic demand dynamics than our base estimates. And finally, on our future decisions. Current price growth has slowed significantly, but we note rising risks that may lead to accelerating inflation in the future. Especially important for us are those risks that may sustainably affect demand and prices in the medium term. Monetary policy affects the economy and prices with certain lags, and therefore our decisions must be forward-looking. I emphasize that neither further rate cuts nor the size of each specific meeting's cut are predetermined. We may need pauses to assess all incoming information and the effects of our previous decisions. Only maintaining a balanced approach, especially under high uncertainty, will allow us to achieve a sustained result and stabilize inflation at a low level. Thank you for your attention.

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Moderator11:46:40

Thank you, colleagues. Please, your questions — and don't forget to introduce yourselves and name your publication. Masha, please. First row.

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Maria Stepanova11:46:50

Good day, Informagent STAS, Maria Stepanova. What options were considered today? You already said that further steps are not predetermined, but has the probability of another 0.25% cut increased? Thank you.

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Elvira Nabiullina11:47:07

Thank you. A traditional question for us. This time, three rate options were very thoroughly considered: 14.25% — to leave unchanged, 14% — to cut by 25 basis points, and 13.75% — to cut by 50 basis points. By the way, all these options appeared in economists' questions. There were weighty arguments for each, and a significant number of participants expressed views in the discussion. In my view, the final decision was indeed a balanced consideration of all arguments, including from the standpoint of policy error. Summarizing, participants' positions differed on three main parameters. First: the assessment of the sustainability of the observed recent months' persistent inflation indicators. Second: the assessment of the scale of additional pro-inflationary factors that emerged since the last board of directors meeting. On the demand side, there is a shift in budget plans to 2026 and subsequent years. On the supply side, there are restrictions, including temporary fuel production reduction. The third parameter is the assessment of the degree of tightness of monetary conditions, important in light of significant acceleration of lending growth in the past two to three months. Virtually all participants noted that the room for further rate cuts has narrowed. To what extent it has narrowed was and will be a subject of discussion at the next meeting.

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Moderator11:49:15

Thank you. Nastya.

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Anastasia Saveleva11:49:21

Thank you. Anastasia Saveleva, Interfax. You already said the room for further rate cuts has narrowed. Could you say how much the budget factor influenced this? And do you see risks that this room could shrink further under the impact of the fuel market situation, which could have secondary effects — rising prices for other goods, such as food — and could lead to rising inflation expectations?

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Elvira Nabiullina11:49:55

We generally assess that the room for cutting the key rate has decreased. This will be discussed in detail at the next structural meeting. But the factors influencing this — their specific values are difficult to measure — we note that pro-inflationary factors have strengthened their impact. Regarding temporary supply-side factors, it is very important how the situation develops and whether these factors transition from one-off events into sustained price pressure, primarily through rising inflation expectations. Gasoline is a marker product, and the June surveys do not yet reflect this. We will look at the July surveys on inflation expectations before the next meeting. It will also be important to see how this affects costs across a wide range of goods. These are factors that need to be assessed. I will say again that this was indeed one of the main factors in taking a balanced decision and reducing the step of the rate cut.

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Moderator11:51:12

Colleagues, please. Pavel.

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Pavel11:51:19

Thank you. In the press release you noted that a higher trajectory of the key rate may be required. Does this apply to 2028? Thank you.

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Elvira Nabiullina11:51:33

We will present our new view of the key rate trajectory at the structural meeting and assess the dynamics that may be required for 2026, 2027, and 2028. Most likely, changes will mainly affect 2026 and 2027. But this will need to be reviewed and recalculated. Yes, please, Alexey Borisovich.

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Alexey Borisovich11:51:57

Without anticipating the July meeting, because all factors affect the entire forecast, not just those changed at this moment. We must proceed from the assumption that if in 2028 budget policy remains outside the regime of a zero structural primary deficit, this means monetary policy will most likely not be fully neutral in 2028, because it will have to compensate for that. Again, all else being equal, and including how this change in budget policy will affect the neutral rate level — we assess this annually before presenting the main directions of monetary policy. Specific figures cannot be named now, but by the next meeting there will be more clarity.

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Moderator11:53:05

Thank you, colleagues. Please, Nikita.

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Nikita Mitrofanov11:53:09

Good day. Nikita Mitrofanov, Telegram channel Economic. I continue developing my macroeconomic model that tries to predict your decisions. Today the model predicted a 70% probability of a 0.5% cut and 30% probability of a 0.25% cut. The model's prediction was based on calculated inflation data, and my data were actually worse than yours in the press release — reality turned out better. The 30% probability was because pro-inflationary expectations among the population remain quite high, unemployment is low, and a new factor emerged — the structural budget deficit. In this context, I would like to ask: what influence does monetary policy tightness have on money supply growth through the budget channel, since it seems monetary policy primarily affects the private sector and less the budget channel? Thank you.

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Elvira Nabiullina11:54:38

Naturally, we primarily influence the pace of market lending growth. That is why we emphasize the importance of the share of subsidized loans, because they are largely insensitive to our rate decisions. Our monetary policy does affect the budget because of internal debt servicing costs and subsidized programs where the budget has taken on significant interest rate risk. But overall, monetary policy does not have a direct influence on the budget channel. Rather, it is the other way around — there are government decisions being prepared to fulfill priority tasks. In a situation where resources are fully utilized, the Central Bank plays a compensating role, adapting monetary policy so that the private credit channel does not pump too much money into the economy and inflation does not accelerate. The difficulty is that our decisions act with a lag of three to six quarters. That is why we emphasize the importance of earlier predictability of budget policy.

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