elvira nabiullina : review of recent inflation developments in russia and economic outlook statement by ms elvira nabiullina, governor of the bank of russia, in the follow - up to the board of directors meeting, moscow, 22 october 2021. * * * good afternoon, w e made a decision to raise the key rate by 75 basis points to 7. 50 % per annum. this is a significant increase and, obviously, this is not a fine - tuning exercise. this decision is driven not only by the current pace of inflation, but primarily by high inflation expectations and a considerable revision of the forecast compared to july. inflation will be going down from a higher point than we assumed. this will require a greater tightening of monetary policy than we planned in our july forecast and expected in september. i will now explain in detail why we have made this decision. first of all, i would like to talk of inflation. in august and especially in september, inflation significantly exceeded our forecast. during the first weeks of october, we could see no signs of a weakening of inflationary pressure. although the sudden surge in inflation that occurred in september was provoked predominantly by temporary factors, we consider this situation as potentially dangerous as it affects inflation expectations. i would like to remind you that inflation soared in september due to a smaller vegetable harvest and higher costs in livestock production. meat, milk, and vegetables are all the so - called marker products. when prices for marker products surge, even if their share in the consumer basket is rather small, this might speed up inflation expectations. this is what we observed in sugar and sunflower oil prices last year. today, inflation expectations are already high, and this impact might be even stronger. inflationary pressure is still spurred by higher prices in global markets. recently, prices for food products, coal, non - ferrous metals, and especially natural gas continued to trend upwards. increased gas prices are pushing up prices for nitrogen fertilisers, which might ultimately become an additional driver of pressure on prices in food markets put by agricultural enterprises ’ costs. however, there are also goods demonstrating a stabilisation of prices and even their adjustment downwards. these are steel, iron ore, precious metals, and lumber. nonetheless, we cannot be confident yet about how steady these trends are. global markets remain a source of elevated inflation risks. however, the question is not only and not so much about transitory factors. it is more important that the indicators of steady

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 ). in terms of monetary policy, this is the sensitivity of inflation expectations to temporary or local factors which induces risks, rather than the fact that households ’ inflation expectations exceed inflation measures. this is clear from the analysis of the reasons causing inflation deviation away from our october ’ s forecast. this deviation is quite notable — + 0. 7 percentage points. according to preliminary estimates, 0. 2 percentage points of this deviation stem from a faster rise in sugar and sunflower 1 / 4 bis central bankers'speeches oil prices and 0. 3 percentage points — from the growth of grain export prices and their passthrough to prices for both bakery products and a broader range of food products. the remaining 0. 2 percentage points are interpreted as additional steady inflationary pressure. it may result from both a faster revival of demand in a number of industries already facing supply - side constraints and secondary effects brought about by increased inflation expectations. this is what may impact a steady level of inflationary pressure in the future as well. therefore, today it is rather important how the situation will be unfolding in the future, including how inflation expectations will be changing and whether secondary effects may become more intense. this may result in a longer - lasting influence of one - off factors on prices. moreover, we should take into account that a rise in inflation expectations may speed up the growth of the demand for consumer lending which has already been expanding materially amid the accommodative monetary policy. 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