The Central Bank of the aggressor country Russia has increased the base interest rate to the maximum since the beginning of the criminal war unleashed by the Kremlin against Ukraine.
Points of attention
- The Central Bank of Russia has increased its base interest rate to 21%, the highest level since February 2003, in an effort to tackle rising inflation.
- Inflation in Russia reached 9.8% in September, leading to heightened public expectations of further inflation growth and necessitating tougher monetary policies.
- Factors driving inflation in Russia include increased expenses due to the ongoing war with Ukraine, the weakening Russian ruble, and political pressure on the central bank amidst economic challenges.
- The International Monetary Fund (IMF) has revised down its economic growth forecast for Russia, citing the impact of the conflict and inflation on the economy.
- The decision reflects the urgency for the Russian government to address inflation risks and stabilize the economy amid external pressures and internal challenges.
What is known about the maximum increase in the base rate by the Central Bank of the Russian Federation
It is noted that the base interest rate was increased by the Central Bank of the aggressor country to 21%, which is the highest since February 2003.
According to the Russian central bank, inflation in the country reached 9.8% in September, and public expectations for further inflation growth reached their highest level since the beginning of the year.
Further toughness of monetary policy is needed to ensure that inflation returns to targets and reduce inflation expectations, — said representatives of the Central Bank of the aggressor country.
Among the main inflation risks, high inflation expectations and deviations of the Russian economy from the trajectory of balanced growth, as well as deterioration in the terms of foreign trade, were noted.
What provokes rising inflation in Russia
The Ministry of Finance of the aggressor countries expects an increase in expenses in the amount of $15.5 billion by the end of this year due to the need to cover the costs of continuing the criminal war against Ukraine.
Another significant factor driving inflation is the weakness of the Russian ruble, which has fallen by more than 12% against the dollar since early August to 97 rubles.
In addition, it is noted that the increase in the base interest rate demonstrates the political support of the leadership of the agency, which is experiencing furious pressure from some of the most influential businessmen in Russia, including the heads of the country's largest oil and defense companies, to end the harsh restrictions.
The level of interest rates on business loans depends on the discount rate.
The International Monetary Fund (IMF), which canceled its mission to Russia last month after protests from several European countries, cut its economic growth forecast for Russia by 0.2% to 1.3% in 2025 from 3.6% this year.
