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 July 2021. * * * Good afternoon, We have made the decision to raise the key rate by 100 basis points to 6.50% per annum. Our today’s decision is based on the updated macroeconomic forecast that was significantly revised. The growth of the Russian economy sped up in the second quarter, and inflationary pressure turned out to be higher and more persistent than forecast. Some sectors are already demonstrating signs of overheating. Inflation expectations also continued to go up. Given the observed trends, we have revised our inflation forecast upwards by one point. This year, it will equal 5.7–6.2%. The important step in our policy, which we have made today, is needed to bring inflation back to the target. We expect inflation to slow down to 4.0–4.5% next year and stay close to 4% further on. Nonetheless, our policy will not contain the steady rates of economic growth. I would now dwell on the factors behind our today’s decision. I will start out with inflation. As of 19 July, inflation was 6.5% in annualised terms. This is considerably above the target and is close to five-year peaks. High growth rates are driven by both temporary and steady factors. According to our estimates, steady factors dominate at the moment.
https://www.bankofengland.co.uk/-/media/boe/files/speech/2016/redeeming-an-unforgivingworld.pdf?la=en&hash=7B7AC35CC3017FCD8EF5BE7D5F2D0C4EA22C7E05  6  All speeches are available online at www.bankofengland.co.uk/speeches  6  resolution failed, and defaults occurred, it would take the failure of more than the CCP’s two largest clearing members in extreme but plausible market conditions to lead to the exhaustion of the default fund – this is a scenario, in the tail of the tail, which would almost certainly be more severe than those we have seen historically, including in the crisis. The crisis has, of course taught us, that we need to think about events in the very tail of the probability distribution. So we do need to ask what happens when prefunded loss absorbency is exhausted and insufficient to cover losses. Unlike banks, if prefunded resources are insufficient to absorb losses, the CCP does not become insolvent. CCP’s rulebooks, to which all members agree in advance, allow a further series of recovery actions, in a prescribed sequence. A CCP could require its members to contribute more resources, it could reduce its liabilities to some of its members, and ultimately it could “tear –up” (i.e. cancel) all or some of its contracts – in effect the closure of the clearing service. The sequence of ever more draconian actions, reflect the fact that CCPs are not independent risk takers. In fact, they should not be risk takers at all. They are services that, for a fee, manage the risks of derivative counterparty default that their members would otherwise face directly and at far greater cost. Again, the comparison with banks is instructive.