A key banking indicator – the regulator’s interest rate – immediately jumped by two percent. In December last year, the increase was as high as 16%. The rate remained at this level for six months. And here we go again: hello.
“It is necessary to take measures to increase the rate,” says Maxim Chirkov, associate professor of the Department of Economic Policy and Economic Measurements at the Institute of Economics and Finance of the State University of Management. – The basis for this is to keep inflation within certain limits. The Central Bank once set the inflation target at 4%, but it has long since exceeded these limits. Therefore, such drastic actions by the Central Bank are justified.
In fact, according to Rosstat, prices have increased by 9.2% over the past year. Since the beginning of the year alone, inflation has risen to almost 5%. At this rate, by the end of the year it could be 7% or even 8%. In this case, the key rate is one of the main tools that can influence inflation. The rates on both deposits and loans in commercial banks depend on it. The higher they are, the more profitable it is to save and earn good interest on free money, rather than to take out loans at exorbitant rates. Less money in circulation means less inflation, because demand decreases and the balance with supply is restored.
“We are used to looking at this whole picture as if we were looking at it from the outside, but this is wrong,” says the economist, author of the Telegram channel. “Everything is fine, there is money!” Denis Raksha. – We are part of the economy, and the Central Bank plays against what is happening in the economy, namely against the acceleration of inflation. Therefore, everything the Central Bank does affects us or will affect us in the future. It tries to reduce the amount and availability of money in the economy so that people cannot spend it or choose to save it instead of spending it. Accordingly, based on this logic, the Central Bank raises the rate and limits the ability of banks to issue loans (both for banks and for borrowers). And it assumes that all this will lead to a decrease in inflation growth rates, and that by the end of 2025 these rates will fall to 4% per year.
Expert Maxim Chirkov explains that, as a rule, high interest rates hinder economic development.
“But in this case, the increase is temporary and will certainly not stop the economic growth that has emerged since the beginning of the year,” he added.
