Monetary conditions are the third factor we discussed when making our decision. Monetary conditions remain accommodative. Coupled with the Government’s support measures, this promotes lending across all segments, including the households, corporates, and small and medium-sized businesses. The annual growth of corporate lending reached its five-year high in October. The offering of corporate bonds has also been expanding. Mortgage lending continues to increase significantly. The portion of subsidised mortgage loans slightly contracted in October, but still equals nearly 30% of the disbursements. Concessional lending terms will remain in place until the end of 2021 H1. A number of programmes launched to support corporate lending have already been terminated. We are going to monitor how market interest rates and non-price lending conditions will be adjusting in this situation. The current economic situation is another essential factor influencing our decisions. The epidemiological situation has worsened today, which expectedly has a restraining effect, but this impact is currently considerably lower than in 2020 Q2. Although the situation is not uniform across industries, the decrease in economic activity is not as drastic as in spring and early summer when large-scale anti-pandemic restrictions were in place. Furthermore, companies and households have already adjusted to the changed environment to a certain extent, including additional requirements. Therefore, we may rather talk of a pause in recovery processes. We can observe that economic trends and financial flows are changing unevenly. They have returned to normal or even exceeded this level in a number of sectors, while other industries are far from a complete recovery.

Moreover, costs are pushing inflation upwards for other reasons as well, namely a shortage of manpower in certain industries, expenses to ensure compliance with additional sanitary and epidemiological rules, and possible disruptions in supplies due to the aggravation of the pandemic situation. Of course, the acceleration of current inflation itself should not significantly impact our monetary policy, but there are signs suggesting that proinflationary trends may become longer-lasting. This is evidenced by a material rise in households’ and businesses’ inflation expectations. Increased inflation expectations may induce secondary effects. This is another factor which we took into account. There are signs that secondary effects have already started to manifest themselves. What are the reasons behind them? A considerable rise in prices for individual frequently purchased products, even when it is driven by one-off factors, makes people expect an increase in prices for a broader range of goods and services. This in turn explains the readiness to pay more and pushes prices upwards. Actually, we are already observing such an environment, which once again proves that households’ inflation expectations are currently not anchored yet. When I say that they are not anchored, I do not imply the level of households’ inflation expectations, but rather their response to one-off factors. The fact that households’ inflation expectations are significantly higher than current inflation is typical not only of Russia, but of a whole range of countries (even where inflation is very low).