Handing out free cash to citizens as part of coronavirus relief will lead to hyperinflation in Russia Central Bank

Distributing money to people as part of coronavirus relief measures could be catastrophic in terms of inflation, according to the Bank of Russia Governor Elvira Nabiullina.

“If the Central Bank prints money and gives it out at a zero rate, what could that lead to? I can recall the 1990s. This will lead to an ‘explosion’ of inflation, and for those who received those banknotes it will be hard to buy anything,” she said.

Nabiullina added that, according to the bank’s estimates, an easing of monetary policy is needed to maintain annual inflation close to four percent over the forecast horizon.

“The slump in domestic and external demand this year will significantly contain inflation, which reduces the risk of its substantial deviation downwards from the target in 2021 and over a medium-term horizon if no additional monetary policy measures are introduced,” she said.

The bank governor also said that the economic situation will be “returning to normal step-by-step,” assuming that governments will be gradually lifting or considerably easing the majority of current restrictions in the second quarter of the year. “In this case, we can expect that in the third and fourth quarters, economic activity will be recovering quarter-on-quarter,” she said.

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