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, 23 april 2021. * * * we have made the decision to raise the key rate by 50 basis points to 5. 00 % per annum. today, we have discussed two possible options : whether to increase the key rate by 25 or 50 basis points. i would like to explain why we have chosen this very option accelerating the return to neutral monetary policy. the economy continues to recover actively. we estimate that it will bounce back to the prepandemic level in the second half of the year. the majority of industries have already completely recovered today. the rise in all other sectors is only constrained by the remaining restrictions largely associated with the pandemic. accommodative monetary policy has fully played its countercyclical role, supporting the economy at the acute stage of the crisis. currently, the fast recovery of demand is forming steady inflationary pressure intensifying supplyside constraints. households ’ and businesses ’ inflation expectations have risen notably. they have been elevated for over six months. this is a matter of our great concern. high inflation expectations are being translated into inflation movements already now. moreover, this effect on the steady component of inflation is becoming increasingly stronger. if they are not limited, this will continue to boost inflation. amid these inflation processes, we need to return to neutral policy faster than we assumed before. progressive economic growth will continue in this case. any delay would require us to raise the key rate more significantly in the future, or even to pursue tight monetary policy. after today ’ s increase in the key rate, we have approached the threshold between accommodative and neutral policy. taking into account the time lag effects of policy, monetary conditions will generally stay accommodative for a while longer. we will be closely monitoring how the market will be adjusting to our decisions. i would now dwell on the factors of our today ’ s decision. i will start out with inflation. today, the acceleration of price growth is absolutely obvious across a wide range of products and services. this is caused not only by one - off factors and the pass - through of higher production costs, but also by the stronger impact of the steady component of price dynamics to an increasingly greater extent. in our opinion, this growth reflects the

of companies in the 21st century and urging the general public to boycott them shows not only a lack of responsibility, but also a lack of taste and common sense. i feel certain that our citizens know better and will continue to buy those products and services that suit them best, guided exclusively by their economic interest. the key principle of the late 18th century economy of comparative advantage explains that international trade is beneficial to all parties involved, and i guess that serbia of the 21st century wishes to benefit from international trade and finance, as well. i would also like to remind you on this occasion that today ’ s standard of living in serbia is largely based on foreign direct investments and access to foreign borrowing. hence, pensions are paid out regularly and on time, new jobs are created ( in the banking sector alone, the number of jobs is 50 % higher than at the onset of transition ), our citizens can take out mortgage loans, etc. in order to finance the current account deficit measuring 16 % of gdp in 2007, serbia needs foreign direct investments and fresh money. if we were to finance growth and development exclusively from our domestic accumulation, the volume of lending in 2007 would have been 4 to 5 times lower. it is true that the national bank of serbia can sustain macroeconomic stability in the short run by relying on monetary policy measures and interventions in the foreign exchange market. however, in the medium and long run, you do not make something out of nothing. i feel it is my duty to warn you that the ultimate costs of a significant decline in the level of fdis and restrictions on foreign borrowing will in the long - run be borne by our enterprises and citizens. however, i am sure it will not come to this, because it is not in serbia ’ s interest.