Conflict in the Financial Bloc Has Erupted in the rf Against the Background of Tough Monetary Policy

On the eve of the June meeting of the central bank of russia, the struggle for influence over monetary policy has turned into a sharp confrontation. Minister of Finance Anton Siluanov launched an aggressive political and information campaign against the central bank on behalf of pro-kremlin business groups demanding an immediate decrease in the discount rate. The regulator’s head Elvira Nabiulina, is in the crosshairs.

The pressure campaign includes not only statements by the government of the rf, but also messages about Nabiulina’s possible resignation (allegedly due to her unwillingness to give in to businesses) are being actively broadcast in the russian information space. These injections coincide with the start of the audit of the central bank’s monetary policy by the accounts chamber of the rf – another tool used by opponents of the regulator’s tough monetary policy.

On May 19, in a TV interview, Siluanov directly accused the central bank of holding back the economy, citing a slowdown in GDP growth (to 1.4 % year-on-year in the first quarter) and a decline in lending. The Minister does not hide the fact that the increased rate hits the budget and reduces the income of pro-kremlin oligarchs. In other words, businesses and the government are demanding that the regulator return to the “cheap money” policy.

Behind this tactical dispute there is a strategic crisis: the russian economy is under the blows of unprecedented Western sanctions imposed in response to the full-scale invasion of Ukraine. Isolation from international markets, capital flight, lack of technology and financial resources have forced the central bank to switch to survival mode, toughly controlling inflation and the currency.

For Nabiulina, maintaining a high rate is the last safeguard against financial destabilization. For Siluanov and the businesses under his control, it is a guillotine that cuts into profits, credit programs, and the tax base. The pressure from the business association “delovaya rossia”, which got in direct contact with putin on May 13, only confirms that a powerful coalition front has been formed against the regulator.

Against the background of this struggle, there are two possible scenarios for the June 6 meeting of the central bank: maintaining the rate at 21 % with a political hint at lowering it in July, or a partial concession under pressure and a 0.25 % to 1 % decrease.