The world in which the central bank lives: our economy is overheated, and the monetary conditions are soft In a new summary of the discussion on the key rate, the central bank concluded: in the third quarter the economy "returned to a positive GDP gap". The word "overheating" is not heard, but the meaning is the same. It turns out that the central bank finds overheating in our economy regardless of its dynamics: in the years 2023-2024. With GDP growth of about 4%, and now, when he himself expects 0.5-1.0% at the end of the year. In the logic of the central bank, everything is simple. The output gap is excess demand over supply capacity, and why the excess occurred is not important in the concept. Now, according to the central bank itself, the fact is that in some industries supply opportunities have been "temporarily limited": some refineries have dropped out. At the same time, demand increased moderately, and consumption in August decreased completely. As a result, "overheating" can occur when demand is flat or even declining—enough for capacity to shrink faster. what's going on If we take this logic to an absolute level, then, in principle, we can see the destruction of production potential and constantly register a "positive gap", and continue to suppress demand. The smaller the capacity, the greater the "overheating", the stricter the policy, the smaller the investment in new capacity. A vicious circle that reinforces negative trends, even if they were caused by external factors. At the same time, the resumes themselves have alarming signals about the economy. Part of the investment goes to rehabilitating damaged facilities and protecting infrastructure, meaning it does not expand the supply. The financial results of the companies in January-July decreased more than in the first half of the year, and in fact they continue to grow only in oil and gas. However, at the same time, some of the participants in the discussion at the central bank even admitted that conditions with a key interest rate of 14% and inflation of about 7% "could approach neutrality or even be somewhat soft". I mean, again: the real rate is about 7 percentage points, profits are falling, investments are not going for expansion, but for repairs, and all these are signs of "soft conditions"?

The world in which the central bank lives: our economy is overheated, and the monetary conditions are soft In a new summary of the discussion on the key rate, the central bank concluded: in the third quarter the economy "returned to a positive GDP gap". The word "overheating" is not heard, but the meaning is the same. It turns out that the central bank finds overheating in our economy regardless of its dynamics: in the years 2023-2024. With GDP growth of about 4%, and now, when he himself expects 0.5-1.0% at the end of the year. In the logic of the central bank, everything is simple. The output gap is excess demand over supply capacity, and why the excess occurred is not important in the concept. Now, according to the central bank itself, the fact is that in some industries supply opportunities have been "temporarily limited": some refineries have dropped out. At the same time, demand increased moderately, and consumption in August decreased completely. As a result, "overheating" can occur when demand is flat or even declining—enough for capacity to shrink faster. what's going on If we take this logic to an absolute level, then, in principle, we can see the destruction of production potential and constantly register a "positive gap", and continue to suppress demand. The smaller the capacity, the greater the "overheating", the stricter the policy, the smaller the investment in new capacity. A vicious circle that reinforces negative trends, even if they were caused by external factors. At the same time, the resumes themselves have alarming signals about the economy. Part of the investment goes to rehabilitating damaged facilities and protecting infrastructure, meaning it does not expand the supply. The financial results of the companies in January-July decreased more than in the first half of the year, and in fact they continue to grow only in oil and gas. However, at the same time, some of the participants in the discussion at the central bank even admitted that conditions with a key interest rate of 14% and inflation of about 7% "could approach neutrality or even be somewhat soft". I mean, again: the real rate is about 7 percentage points, profits are falling, investments are not going for expansion, but for repairs, and all these are signs of "soft conditions"?