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Post: Economist commented on the interest rate increase


Central Bank of Russia. Archive photo

RANEPA associate professor explained the consequences of increasing the Central Bank’s interest rate to 15%

MOSCOW, October 28 – RIA Novosti. RANEPA Dmitry Desyatnichenko, Associate Professor of Economics at the North-West Business Institute, commented in a conversation with RBC The Bank of Russia increased its key interest rate.

As Desyatnichenko suggests, the regulator’s decision will likely go unnoticed by markets, while the cost of borrowing for businesses and the economy will continue to rise. According to him, commercial banks’ deposit rates grow slowly and react non-linearly to interest rate increases.

Governor of the Central Bank of the Russian Federation Elvira Nabiullina - RIA Novosti, 1920, 27.10.2023

Nabiullina explained how the key interest rate affects prices

“Ruble liquidity in the economy is still very high, so the ruble itself and all ruble assets are now undervalued. The previously increased interest rate had almost no effect on this,” he said.

The Central Bank of Russia unexpectedly raised its interest rate on Friday from 13% to 15% annually; This rate was the highest since May last year. The regulator believes that current inflation pressure has increased significantly and is above the Central Bank’s expectations. Analysts surveyed by RIA Novosti generally predicted that the Central Bank would increase the interest rate by one point at this meeting.

According to Central Bank governor Elvira Nabiullina, the regulator is not ruling out the possibility of another increase this year or the retention of the key interest rate at the current level.

Inflation has so far responded poorly to tight monetary policy: it rose to 6.59% on an annual basis as of October 23, according to the Ministry of Economic Development.

PSB Deputy Chairman Konstantin Basmanov at EEF-2023 - RIA Novosti, 1920, 27.10.2023

Konstantin Basmanov: The deterrent effect of the high rate is quite useful

Source: Ria

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