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By John Helmer, Moscow
@bears_with [2]
The four-term (2013-2027) Governor of the Central Bank of Russia (CBR), Elvira Nabiullina, has assured the State Duma this week that the biggest enemy Russia faces is not the combined military and economic forces of the US and NATO, but over-heating in the domestic economy as it mobilizes to defend itself.
That, Nabiullina said, is not the impact of drone, missile, and bomb attacks on Russian targets inside the country, at sea, and along Russia’s international oil and gas pipelines; nor of the sanctions aimed at destroying Russian exports of energy, Russian tankers, and the fleet’s access to world markets through the Danish Straits, the Suez Canal, and the Bosphorus.
In Nabiullina’s report [3] of her strategy for 2026-2028, drafted last month and released on October 27, the words “war” and “defence” are not mentioned. The only “geopolitical conditions” the CBR report acknowledges are “deglobalisation processes” and “new sanctions and second-round effects of enacted sanctions”. About them, Nabiullina and her advisors have concluded that the Trump Administration’s “tighter sanctions will lead to an increase in the discount for Russian exports as well as a moderate decline in oil production and exports. Oil prices will notably drop in 2026 and will not bounce back to the level of the baseline scenario even by the end of the forecast horizon.”
The forecast of the CBR, the report says, is that “if the world economy faces a financial crisis in 2026 and sanction pressure increases, the Russian economy’s potential and its growth rates will both decline. GDP will be contracting during two years. A significant decline in supply will be fuelling inflation. Fiscal policy is assumed to prop up the economy owing to a structural primary deficit. To offset a reduction in oil and gas revenues, the economy will be extensively using the resources of the National Wealth Fund, which involves the risk of depletion of its liquid part as of the end of 2026.” Nabiullina’s response, the report concludes, will be to fight the sanctions war by raising the Central Bank’s key rate from 16.5%, as it was fixed last week, to between 18% and 20%. “To prevent inflation from spiralling out of control, the Bank of Russia will be forced to pursue tighter monetary policy in 2026–2027. This will decelerate inflation to 4.0–4.5% in 2028.”
This is Nabiullina’s Trojan Horse for the Russian economy at war. The CBR projection is for two years of recession from now through 2026 and 2027; that is, close to zero growth this year to be followed by negative growth rates predicted from minus 2% to minus 3.5% [3].
Nabiullina admits that “considering its actual dynamics, we have lowered the GDP growth forecast [4] for 2025 to 0.5–1.0%.” This, Russian economists point out, is within the standard margin for statistical error from zero.
Nabiullina doesn’t admit that the recession forecast in the Bank’s risk scenario for 2026-2027 is the consequence of the CBR’s key rate policy. But she does blame other government policies, including military spending, the budget deficit, and increased taxes. “Significant pro-inflationary risks have materialised since the previous meeting,” Nabiullina claims [4]. “They are primarily associated with an increase in the budget deficit in 2025 and higher fuel prices. In September, a decline in underlying inflation measures paused. The expected increase in taxes will help bring inflation down over the medium-term horizon, but will also lead to a one-off rise in prices in the short term. We have factored this into our decision, first, by reducing the pace of monetary policy easing, and, second, by revising upward the projected key rate path required to bring inflation back to 4%.”
“As these [state spend and tax] factors fade, disinflation will continue. This will be supported by tight monetary conditions. The upward deviation of the Russian economy from a balanced growth path is narrowing [5].” This last sentence is the CBR euphemism for squeezing the economy with a high key rate at the same time as the government increases the tax burden. For zero to negative GDP, for growth to recession, Nabiullina’s euphemisms are “slowdown” and “cooldown”. “‘All decisions on the key rate,’ she told the State Duma this week, are based on the need to end the period of high price growth as quickly as possible while preventing the economy from overcooling. A hasty reduction in the key rate would undo all the progress achieved. ‘We would have to start all over again,’ Nabiullina said [6].”
Nabiullina’s promotion of “necessary recession” to cure inflation has triggered widespread but silent dismay – silent because it is understood [7] she is protected by President Vladimir Putin.
Last month, in a session with government ministers Putin repeated Nabiullina’s line. “Last year we agreed,” the President said [8], “there was need to take the necessary measures to curb inflation and to strengthen macroeconomic stability. We agreed that this would inevitably cool the economy and, as we said back then, ensure its soft landing. The general opinion was also that we must walk this sharp edge and not to undermine the macroeconomic policy, not to overcool the economy, and not to freeze it.”
Putin then defended [8] the outcome. “According to the Ministry of Economic Development, in July, gross domestic product added 0.4 percent in annual terms and in the seven months of this year GDP grew by 1.1 percent. The question is whether this is enough. Is that what we wanted? Are we succeeding in achieving the goal that we set for ourselves? Or, do we need to act differently at a faster pace, naturally, while ensuring macroeconomic, inflationary stability and taking into account the balanced policy of the Central Bank. The inflation trend is quite clear: in July, consumer prices grew by 8.8 percent and in August by 8.1 percent. The inflation drop trajectory is below the forecasts provided by the Government and the Bank of Russia. In other words, the efforts to lower inflation are effective. It is very important for moderate prices to have a positive impact on business and investment activity, allowing for more dynamic and sustainable growth.”
Vocal criticism has come from economists in the opposition seats in parliament. They say Nabiullina’s policy is stimulating financial speculation on the rouble, stocks, and commodity trade futures, boosting bank profits to record highs but crushing the real economy, and increasing poverty. According to Mikhail Delyagin, a well-known critic and deputy head of the Duma Committee on Economic Policy, the Central Bank is deliberately following the policy of Russia’s enemies, starting with the US-controlled International Monetary Fund (IMF).
“The IMF continues to act as the senior management structure for the Russian Central Bank,” Delyagin reported [9] this month. “The Central Bank regularly — and very clumsily — tries to declare that this control is purely formal. However, these attempts are refuted by the regulatory documents of the Central Bank itself (https://t.me/EvPanina/15113 [10] )…It turns out that a high-ranking official of the globalist structure, which oversees the Central Bank of Russia, is actively lobbying for the confiscation of Russian assets. Which has been the work of the Central Bank of Russia! The [CBR reserves] have ended up exactly where they can now be removed. An amazing coincidence…Everything is going to be fine for those who serve the West against Russia.”
TRACKING THE CBR INTEREST RATE, INFLATION AND ROUBLE EXCHANGE RATE
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[12]Source: top, https://www.cbr.ru/eng/about_br/publ/ondkp/on_2026_2028/ [3] ; bottom, https://tradingeconomics.com/russia/currency [13]
CBR FORECASTS FOR GDP GROWTH, INFLATION, KEY RATE
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[17]Source: https://www.cbr.ru/eng/about_br/publ/ondkp/on_2026_2028/ [3]
The critics argue that Nabiullina’s policy benefits only short-term speculation by the country’s bankers. “There is simply no one,” Delyagin has warned [18], “understanding this basic truth in the liberal crowd ruling our economy – that is, the crowd serving financial speculators.”
[19]“The public has the right to be negative,” Delyagin (right) said [20] this week. “But from the point of view of the administration of the country, everything is fine, as the goal of economic policy is being achieved successfully. If you remember, about a year ago, when GDP was growing by a little more than 4 percent, it was explained to us that this was unacceptably high economic growth, that development at a rate that exceeded the rate of statistical error was absolutely unacceptable for a variety of reasons…The objective of the economic policy, which was proclaimed and implemented by the liberal financial managers, was to slow down economic growth. This was called ‘cooling the economy.’ The statements of a number of gentlemen attest to this task, and it has been successfully accomplished: GDP growth has slowed by about 4 times. It was 4.2−4.3 percent, and now in the first seven months of this year — 1.1 percent.”
“At the same time, it is not especially well concealed that inflation was just an excuse. After all, if someone had been concerned about it, then probably there would not have been the irrational increase in [state] tariffs for housing and communal services and the natural monopolies. At least we would have conducted an audit of the natural monopolies first – this is not difficult…But under the guise of talking about inflation in conditions of money starvation, which is artificially created in our country and has nothing to do with the dynamics of the money supply, the economy has been strangled very badly [20].”
[21]Mikhail Khazin (right) is another public economist on the attack. A member of the now defunct Anti-Crisis Expert Council [22], the Khazin backfile of his economic critiques of state policy can be read here [23]. As a Yeltsin Administration economic policymaker in the 1990s, Khazin clashed with superiors Yegor Gaidar, Anatoly Chubais and Alexei Kudrin over their corruption. Khazin’s target now is their protégé, Nabiullina.
“The problem for Nabiullina is that any rate cut will mean that the Central Bank’s monetary policy is
untenable and destructive to the state’s economy, although it brings huge profits to banks, primarily the largest ones. This is evidenced by a comparison of the dynamics of the key rate and inflation. The Central Bank raised the rate from 16% in December 2023 with inflation at 7.43% with its downward trend. As a result, it accelerated to 9.64% in October 2024, and the regulator introduced 21%. What is the outcome? The rate of inflation growth has not changed. They are still far from the 4% that the regulator has been promising for many years. What was the point and calculation of organizing a race with the key rate? After all, the price that the real sector of the economy has paid for this is very high [24].”
“The drop in the GDP growth rate from 4.5% to (at best) 1.5% is equivalent to 6 trillion rubles. Sequestration of financing of national projects in 2025 is estimated at 3-4 trillion rubles. This means approximately 1 trillion in taxes unreceived by the budget from industrial facilities which were not commissioned as planned. Civil sector output fell by individual industry year-on-year in the range from 2.8% to 16.9%. The harvest in 2025 is under threat due to the sharply increased cost of fuel and agricultural machinery. And so on. The only winner is the banking system, which still has high profits and is aiming for 4 trillion rubles (+200 billion rubles YoY). According to the laws of economics, these and other factors will further speed up the flywheel of inflation. The country pays dearly for the banking and financial combinations of the incompetent and biased leadership of the Central Bank [24].”
[25]Sergei Gavrilov (right), a leading economist in the Communist Party (KPFR) faction in parliament, has attacked the new CBR report and forecasts for 2026-28, claiming that each one of the policy-making scenarios assumes increasing inflation, continuing the high key rate, and triggering the cycle of lossmaking throughout the economy, with falling tax revenues, larger budget deficits, and accelerating inflation.
“The rigidity of the regulatory approaches in relation to large investment projects threatens that the economy itself will begin to reproduce losses and additional inflationary pressures. Therefore, it is necessary to ease regulations and lower the key rate, otherwise the regions where manufacturing industry forms the basis of growth will be in the most vulnerable position…the pro-inflationary scenario, on the contrary, is based on increased sanctions pressure and protectionist barriers. This means that supply will not cover demand; imports will turn out to be more expensive; and inflation expectations will decrease more slowly. So then the rate will be kept higher – 14-16% in 2026 and only by 2028 will it fall below 10%…The risk scenario reflects a severe deterioration in the external environment, a jump in inflation to 10%-12% and the need for a sharp tightening of [monetary] policy, which threatens to lead to an economic downturn. But the [CBR] itself estimates the probability of its implementation as low… In order for the [CBR] rate to be below 10% by 2027, we need not only favourable macro conditions, but also decisive steps: fixing inflation at 4%, lowering inflation expectations, meeting the parameters of the budget rule [26]; and supporting large investment projects through easing restrictions… The main issue here is not just to keep inflation on target, but to prevent the excessive rigidity of the monetary policy from becoming itself a source of new risks [27].”
Gennady Zyuganov, the KPFR leader since 1993, has announced the key rate “’should be a maximum of 7%-8%. I listened carefully to the press conference of [Central Bank Chairman Elvira] Nabiullina and her assistant. She was asked how the industry would develop if the rate was 12%. They began to explain that everyone would run for loans, that they would go to the market to buy goods, but there were too few goods. But if you have such a rate as today, there will be no goods at all, because it is unprofitable to produce them. The inflation crisis is being overcome by the output of mass–produced goods of good quality at an affordable price,’ stressed the Chairman of the Central Committee of the Communist Party of the Russian Federation. Earlier, Gennady Zyuganov said that the Communist Party of the Russian Federation would abstain from voting on the federal budget for 2026-2028 [28].”
Counting the number of seats and votes in the State Duma, the KPRF is politically impotent. The government bloc backing Nabiullina for as long as Putin supports her totals 337 seats of 450 – a majority of three-quarters. The KPRF holds just 57 seats; Delyagin’s faction, Just Russia – For Truth (SZRP), 28.
Outside parliament, the recession warnings from the CBR and from the critics have so far failed to put a dent in public confidence that the country is moving in the right direction, according to new polling by the Levada Centre of Moscow.
[29]Source: https://www.levada.ru/2025/10/03/rejtingi-sentyabrya-2025-goda-nastroeniya-otsenki-polozheniya-del-v-strane-odobrenie-organov-vlasti/ [30] This optimism contrasts with the growing public expectation, recorded by Levada in August, of worsening economic conditions for households already [31] and rising unemployment ahead [32].
At the same time, when Levada last polled [33] Russians across the country on the issues troubling them most, inflation outpolled the war by a large margin, 58% to 33%.
In public opinion [34] and in the mainstream media, Nabiullina is not registered as an influential figure. Russian public confidence toward the country’s banks is primarily in the large state and commercial banks, not the Central Bank. This trust was measured [35] last month at 46% — roughly half the trust level which Russians express toward the President and the Army. On the other hand, public confidence in the banking system has been growing steadily more positive over the past decade as the bank default and fraud history of the Yeltsin Administration is forgotten.
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