Russia’s Central Bank raised interest rates from 13% to 15% on Friday as it warned of higher-than-expected inflation across the economy.
“Current inflationary pressures have significantly increased to a level above the Bank of Russia’s expectations,” the Central Bank said in a statement.
The bank said domestic demand was increasingly outpacing the provision of goods and services, while the pace of lending growth was “invariably high.”
“Persistently elevated inflation expectations and their further increase pose a significant risk,” the Central Bank said.
Higher interest rates are designed to cool economic activity by increasing the costs of borrowing and encouraging saving.
The Bank forecast inflation at a range of 7%-7.5% in 2023, up by a percentage point from its previous forecast.
The Bank expects its monetary policy to drive down consumer prices to 4%-4.5% in 2024, then “stay close” to its target of 4% from then on.
Friday’s move is the Bank’s fourth consecutive rate hike. Since July, the Central Bank has raised key rates by a total of 750 basis points.
Economists generally agree that Russia’s economy is overheating, partly as a result of a rapid increase in government spending to fund its invasion of Ukraine.
The economy has been heavily militarized since February 2022, with investment and workers redirected to boost the production of tanks, missiles, guns and ammo.
Some independent analysts play down the impact of the Central Bank’s rate hikes because of Russia’s war spending.
Hinting at the war in Ukraine, the Bank said in its statement: “The updated medium-term parameters of fiscal policy assume a slower than expected decline in fiscal stimulus in the years ahead.”
The Central Bank said it would continue monitoring inflation dynamics together with “domestic and external conditions” in its further rate decisions.
“Economists generally agree that Russia’s economy is overheating, partly as a result of a rapid increase in government spending to fund its invasion of Ukraine.”
Meanwhile in the US. The US economy grows at fastest pace in nearly two years in third quarter of 2023. That pesky dollar is still not dying like the orcs predicted.
https://www.theguardian.com/business/2023/oct/26/us-economy-growth-gdp-2023-q3
I take a different position. Perhaps inflation is running high but the ruble is taking a nose dive which also increases inflation. Higher rates normally in a foreign currency environment is used to stabilize a currency as well as making it attractive for investment. I pray they raise the rates to 100% and beyond.
Meanwhile in Ukraine, interest rates were CUT from 20% to 16%. At least Ukraine has an excuse for high interest rates but the nazis from Moscow don’t…except their tiny fuhrer.
This reminds of the Titanic turning one another bilge pump. It just prolongs the inevitable.
Just wait to see what the rates will be when Ukraine manages to put oil and gas storage on their drone schedules 😉
I wish Biden would open the US oil pipes, then we would see some panic in mafia land.
I can tell you my savings plan has been dead level for almost 2 years except for what I’ve contributed. Oil and gas would indeed panic mafialand. Say what you want about Trump but when the US was flooding the market he shut down Gazprom. That was the most effective sanction. Gazprom LOST 710 billion rubles in 2020 but PROFITED 2.64 trillion in 2021…..what happened in 2021?
“Gazprom LOST 710 billion rubles in 2020”
No, they made a net profit of 135.3 billion rubles. Could you be looking at “Profit attributable to shareholders”, which was negative?
“what happened in 2021?”
In 2020, they were hurt by lower prices and sales, and a huge rise in costs including a foreign exchange-related loss. A warm winter and high levels of reserves in storage contributed to oversupply in early 2020. A cold winter and LNG outflows to Asia contributed to the opposite situation in 2021. Countries needed to replenish reserves, and the recovery of the European economy supported demand for energy in general.
https://www.reuters.com/article/gazprom-results-idCNL1N2MM0JL
They could already be doing that, if they had the long-range ATACMS.
140 million $40 drones carrying a grenade ought to do the trick, lol