Putin's Loyalty to Nabiullina Is Costing Russia Growth

Alexander discusses concerns about the Russian central bank's monetary policy under Elvira Nabiullina. While Russia's economy shows some positive indicators, including recent PMI readings of 50.3 (the strongest since February 2025) and growing real wages and wealth, Nabiullina's interest rate policy remains problematic. The central bank cut its key rate from 15% to 14.5% in June, but this half-point reduction is insufficient given falling underlying inflation. The real interest rate remains around 10%, meaning Russian consumers and small businesses pay 12-13% on loans, with some paying up to 20% or more. This high-rate environment has created an economically damaging situation: large industrial companies like Rosstec avoid borrowing entirely and fund investments through retained profits, while SMEs and consumers face prohibitively expensive credit. The speaker argues this represents overcooling of the economy and risks suppressing growth and potentially triggering deflation below the central bank's 4% target. Even German Gref, CEO of Sberbank and historically a monetary hawk, has publicly stated the economy cannot function long-term at 10% real rates. The core issue stems from Nabiullina's belief that the economy operates at full capacity and that rate cuts would immediately trigger dangerous overheating. The speaker contends this assessment is wrong and that significant spare economic capacity exists. The transcript reveals Putin's loyalty to Nabiullina—who successfully stabilized Russia's financial system and navigated the 2022 crisis—prevents policy changes despite economic costs. A similar pattern occurred 2014-2019 when Nabiullina maintained 5% real rates for five years until Putin finally intervened in 2019, after which growth improved before pandemic and military operation disrupted progress.