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Nabiullina warned about the consequences of state price regulation

MOSCOW, June 11 – PRIME. The deficit that can and does arise under state regulation of prices is much more dangerous than inflation, said the head of the Bank of Russia Elvira Nabiullina at a press conference on Friday. “In our opinion, the deficit is much more dangerous than inflation. If we have inflation while pursuing a consistent monetary policy, inflation targeting policy, then inflation will return to the target, as it happened in the last five years,” Nabiullina said. The Bank of Russia warns of further increase in the rate But if at the administered prices there is any shortage of products, this shortage will not go away, since the artificially low level of prices under administrative regulation does not create sufficient incentives to expand production, she continued. “Of course, this would have extremely negative consequences – such a passion for the administration of prices,” Nabiullina emphasized. She recalled the experience of the last years of the Soviet Union, when prices were officially regulated, and one could assume that there was no inflation, but at such prices it was impossible to satisfy demand; meanwhile, the prices of the “black market” – “there were no statistics, but people saw from their own experience” – grew at a very high rate, and subsequently the latent inflation accumulated in this way still manifested itself. “We see in a number of countries – although I must say that this is not a widespread practice – attempts to stop the rise in prices precisely by administrative regulation. This is a response indeed to the increased world prices for a number of types of goods, primarily raw materials, and so on,” said the head The Central Bank, noting that such a measure is possible only in the short term, since it only stretches the effect on the price over time. “Temporary price administration can only stretch over time the adjustment of prices for individual goods to changes in supply and demand,” she said. But if you fix prices for a long time at a level that is lower than needed to balance supply and demand, then there may be a deficit and a black market – “exactly the situation that arises in a planned economy when the price of all food products is regulated at the state level. “, said the head of the Central Bank. “The expansion of the spheres of administrative regulation can lead to very negative consequences associated with the fact that there may appear and manifestations of deficit, and so on,” she stressed again. See also: The Bank of Russia is ready to tighten control over the issuance of loans to citizens

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