All right, Alexander, let's uh talk

about the Russian economy, which uh

seems to be doing very well. All the

numbers are pointing to an economy that

is uh that is doing well. And uh and we

have the the central bankina

refusing to cut interest rates again or

or she or she cut just just a little bit

half a point. I believe you said was her

interest rate cut. Then of course you

have uh you have people like um like

Spread Bank, the CEO of Spread Bank

saying you got to do more. Got to cut

more. Come on. What are you doing? Uh

all the numbers are are are showing that

that things are going well and and we

have space to to to make those cuts. Uh

what's happening with the Russian

economy?

>> I I I I would actually push back on some

of that. I I think that what we're

seeing is another

I iteration another period of time when

again Nebulan is keeping interest rates

very very high and the result is that

she's choking growth. Now firstly um she

did announce what was supposed to be a

cut on the 19th of June. She [snorts]

cut interest rates from 15% this is the

key rate from 15% to 14 and a half%. A a

point a half point cut actually that is

not a cut at all because if you read

what Nabulina herself is saying

inflation underlying underlying

inflation is in Russia is falling. So

given that underlying inflation is

falling,

the cut that she made means that the

distance between inflation, the

inflation rate and the interest rates

remains about the same. It's about 10%.

And that is the real rate of inflation.

That is sorry the real rate of interest.

it that is the actual cost of money that

Russian banks have to pay to the central

bank when they pay when [snorts] they

borrow from the central bank as all

banks in any economy do and of course

when the banks themselves lend to

business and businesses and to consumers

in Russia they charge charge 10% to

cover themselves for what they're paying

in interest to the central bank and

more. So um the kind of interests

interest rates that people who are

borrowing in Russia are paying continue

to be around 12 13%. That is the real

rate of interest that most people in

Russia are experiencing.

>> Higher. It's probably well for for for

for uh I would actually say 12 to 13%. I

I make maybe I should correct that for

bigger companies. Okay. So the bigger

companies, smaller companies,

homeowners, people who want to take out

loans to buy houses, people who want to

buy cars, they're paying much more. They

can be paying up to 20% and above. So

she's keeping interest rates incredibly

high and I don't think the economic

numbers are actually um showing that you

know things are going so superbly well.

Let let me explain. So in January and

February

we had an overall contraction in the

economy. in March and April there was a

rebound.

Not entirely clear why.

Perhaps it's because um you know there's

been a buildup in demand when people

weren't buying things in January and

February and they come to the shops and

they start buying and things start to

grow again. But then in May we got a dip

again. Not a big one but nonetheless a

dip. Now, what has happened is that the

first figures for June suggest that

we're back in expansion territory and

[snorts]

industrial expansion

apparently is relatively high. We got a

PMI reading of 50.3.

Um, anything above 50 points to

expansion. Anything below 50 points to

contraction. It's actually the strongest

reading we've had since February 2025.

But um with interest rates remaining as

high as they currently are

even as inflation continues to fall. Um,

inevitably, unavoidably, one has to

wonder whether whatever positive

readings we're getting for the first

weeks of June are going to be sustained

for very long. And there is now

increasing calls from businesses, from

the banks in Russia. They're all telling

the central bank, interest rates are too

high. We can't have interest rates, real

interest rates at 10% for very long.

You've got to start reducing interest

rates.

What is happening is you are suffocating

growth growth and risking a recession

and you're also risking the possibility

that inflation is going to fall below

your target. The central bank's target

is 4%. Um, we've had other situations in

the past where Nabulina has overshot

that target and we actually get

deflationary periods in Russia and the

central bank for its part is coming back

and saying no there is no risk of this.

We've looked at all the thing the

numbers um overall expansion in the

economy is taking place. Maybe not very

high expansion but expansion is

happening. inflation risks have not gone

away and we must keep real interest

rates at this skyigh level and this is

becoming now very rancerous and um Gman

Graff who is uh the head of spare bank

the CEO of spare bank which is uh

Russia's biggest um bank by far and the

bank with which most Russians keep their

money and by the way a bank spare bank

which is actually owned by the Russian

central bank anyway he's come out he

spoke two days ago and he said it very

straightforwardly he said my point of

view is that the economy cannot exist

for long at extremely high rates uh real

high rates that exist today and our real

rates are around 10% that is the central

bank's policy rate minus current

inflation and 10% is a rate that can be

applied in the short term in order to

cool the economy.

What we see today in my opinion is quite

obvious. We have already overcooled the

economy. In other words, he's calling

for a bigger cut in interest rates. And

bear in mind, many people have always

considered

um um Graff to be something of a

monetary hawk. He's always been seen as

being very much on the liberal side of

Russian the Russian political system.

And yet even here you're saying that

Nulina's interest rate policy makes

absolutely no sense. It's keeping

interest rates far too high.

PMI is up. Um,

real wages,

>> real wages are growing. Wealth growing

>> growing wealth wealth is growing. Um, I

mean, again, we've had figures about

this. These come from UBS, by the way.

Let me just say something which is that

it turns out that between um 2020 and

2025

>> average wealth in Russia the average

value of things that people own

increased by 37%.

and um median wealth, which is perhaps a

better indicator. In other words, what

most people who are not, you know, big

owners of businesses or owners of

property, they experienced a rise in

their wealth of just over 9%. So, people

are feeling richer and real wages are

growing. And I think this is causing the

central bank um to believe

that it can keep real interest rates at

this incredibly high level because also

profits of companies the big industrial

groups are very strong. So big

industrial groups don't borrow. I mean

you we were talking about companies like

Rosstec or Rosato or those sort of

companies

they don't borrow they don't go they

don't take loans to the banks they

simply fund their actually very large

investment programs out of uh retained

profits so investment remains quite high

net wealth is growing real wages are

growing all of those things but I think

that this is complacent because of

course the people who are being hammered

are the small and mediumsized

businesses, themes

and of course certain types of

consumers, people who want to take out

car loans and that is creating

imbalances in the economy which um it

would be very unwise to perpetuate for

very long and remember if we're talking

aboutmemes

not only are they playing a very

important role in the consumer economy

now that they're also very important in

food production in agriculture in things

of that kind as well. These people need

loans and the price that they are paying

for those loans is very high. [snorts]

>> Okay. So my final question is the the

numbers appear to be good.

>> Yes. Why is Nabilina

not uh not making the the correct moves?

Why does she want to strangle the

economy? What's the reasoning? She does

this. This is this is a history that she

has. Um between 2014 and 2019, for 5

years, she kept interest rates, real

interest rates of 5%. Which again,

everybody was telling her these are too

high. Um and she does the same uh she's

doing the same now only to an even

greater degree. And this I think is

based on an assessment of the economy, a

calculation about the economy which um

you often find um economists make in

Russia which I think [snorts] and people

like um Graff at Sparebank think is

wrong. Nebulina think believes that the

economy is functioning at full capacity

that if she reduces interest rates and

growth increases

because it is at full economy that is

going to lead immediately to overheating

and that will cause inflation to go very

very much higher. So she wants to keep

growth down in order to keep inflation

down and she says if we keep inflation

down and we maintain investment at the

current levels then gradually capacity

in the economy will increase and then

over time we will start to be able to

relax. The trouble with nebutin is that

that point when that happens never quite

is never quite reached. Um, Graff

[gasps] who runs a bank that is involved

in retail and which lends money to

businesses and who therefore in some

ways probably is closer to what is

happening in the actual economy than

Ambulina is. He says no, this isn't

true. The economy has significant

ability to grow. It's got more spare

capacity than the central bank imagines.

Let's ease

monetary policy. He's not talking about,

by the way, you know, cutting interest

rates to zero or you real interest rates

to zero, anything like that. But let's

reduce interest rates from 10%.

And what we will have is we will see

growth increase and we can do that

without risks of significant

overheating. Nebulina has never accepted

that. And back in 2023 2024 she cut

interest rates very much. People like

Rev told her at the time you're cutting

them too far.

The result was we got overheating in the

economy that has scared her and she's

frightened of going back to that

position again.

>> Okay.

>> Uh we will end the video there. Can I

just say

>> I was wondering what what what does the

Kremlin think of? I mean

>> Well, this is it. I'm going to tell you

what I think. I think the Kremlin would

obviously like to see faster growth.

This is this is um something that

obviously Putin wants to see. Putin

however also wants economic stability in

Russia and whatever you think about

Nebulina he she is delivering that

you're not going to see a major crisis

in Russia you're not going to see

inflation take off there's never any

risk of hyperinflation because you have

a central bank that is overcompensating

on the anti-inflation side so I think at

one level Putin likes this there is

another factor which is that Nulina has

been extremely loyal to Putin and has

been in many respects an outstanding

central banker. She cleaned up the

banking system which was in chaos. She

sorted out the problems with the

exchange rate. She took decisive action

in 2022. We've stabilized the economy.

Putin never forgets these things. He's

always fiercely loyal to the people who

execute for him and he's never in my

opinion going to sack her and so long as

Nabulina wants to remain head of the

central bank. She will she will continue

in that position and she will always

be overcautious

on interest rate policy. It's a reality

that anybody who deals with the Russian

economy has to accept.

>> I mean, I accept it. I understand it.

>> But you're trying to to run an economy.

Um, loyalty is great.

>> Yeah.

>> You know, you were loyal to me. That's

awesome. But um you know you gota you

got to run the country. It shouldn't be

based on purely on loyalty. It should be

based on performance.

>> Eventually in 2019

uh the pre this is after she'd run as I

said 5% real interest rates for 5 years.

Eventually even Putin said to no this is

going on too far. We're not getting 4%

inflation. We're getting 2% inflation.

and you accept that this is actually not

good for the economy. So, we must start

to cut interest rates and she did cut

interest rates and

um growth jumped. Um but then of course

the pandemic came and the the um growth

that was being achieved was not was not

consolidated and then we got into the

situation

special military operation and I'm

afraid um what looked like a you know a

breakthrough in terms of interest rate

policy was delayed sooner or later in

some form or other uh even Putin is

going to say to Nebulina, look, this has

gone on for too long and too far. We

must cut interest rates now. And

probably that will happen. Maybe next

year. We'll see.

>> Okay. Uh the dur.locals.com. We're on

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