Russia\u2019s central bank has left its benchmark interest rate at a record 21%, holding off on further increases despite high consumer inflation fueled by the Kremlin\u2019s war against Ukraine.<\/p>\n\n\n\n
The decision Friday comes amid criticism from influential business figures, including tycoons close to the Kremlin, that high rates are putting the brakes on business activity and the economy.<\/p>\n\n\n\n
And it underlines the ongoing friction in the economy between military spending and stable prices for consumers.<\/p>\n\n\n\n
Central Bank of Russia Gov. Elvira Nabiullina said that lending to companies had tightened more than expected due to the October rate hike that brought the benchmark to its current record level. The central bank held open the possibility of an increase at its next meeting and said inflation was expected to fall to an annual 4% next year from its current 9.5%.<\/p>\n\n\n\n
Factories are running three shifts making everything from vehicles to clothing for the military, while a labor shortage is driving up wages and fat enlistment bonuses are putting more rubles in people\u2019s bank accounts to spend. All that is driving up prices.<\/p>\n\n\n\n
On top of that, the weakening Russian ruble raises the prices of imported goods like cars and consumer electronics from China, which has become Russia\u2019s biggest trade partner since Western sanctions disrupted economic relations with Europe and the U.S.<\/p>\n\n\n\n
Russia\u2019s military spending is enabled by oil exports, which have shifted from Europe to new customers in India and China who aren\u2019t observing sanctions such as a $60 per barrel price cap on Russian oil sales.<\/p>\n\n\n\n
High interest rates can dampen inflation but also make it more expensive for businesses to get the credit they need to operate and invest.<\/p>\n\n\n\n
Critics of the central bank rates and of Nabiullina have included Sergei Chemezov, the head of state-controlled defense and technology conglomerate Rostec, and steel magnate Alexei Mordashov.<\/p>\n\n\n\n
Russian President Vladimir Putin opened his annual news conference on Thursday by saying the economy is on track to grow by nearly 4% this year and that while inflation is \u201can alarming sign,\u201d wages have risen at the same rate and that \u201con the whole, this situation is stable and secure.\u201d<\/p>\n\n\n\n
Putin acknowledged there had been criticism of the central bank, saying that \u201csome experts believe that the Central Bank could have been more effective and could have started using certain instruments earlier.\u201d Asked what decision the Central Bank was going to make on the rate, Putin said that Nabiullina didn\u2019t tell him what the rate will be. \u201cShe may not know it herself yet as they discuss it during the board meeting and make the final decision during discussion,\u201d he said. \u201cI hope that the decision will be well-balanced and conform to today\u2019s needs.\u201d<\/p>\n\n\n\n
Putin is in a difficult situation because he needs to keep the economy growing and ensure social stability, said Alexander Kolyandr, senior fellow at the Center for European Policy Analysis. \u201cAnd inflation is not a good recipe for keeping society stable. On top of that he needs to wage his war, and there are not enough resources in the state to meet all three\u201d goals – growth, stable prices, and military spending.<\/p>\n\n\n\n
Nabiullina \u201cdoesn\u2019t care much about pressure from business people,\u201d Kolyandr said. \u201cShe is quite independent and she knows that she has Putin behind her. But the overall slowing down of the economy definitely played a role.\u201d<\/p>\n\n\n\n
The central bank has in the past month turned to other ways of tightening lending to cool inflation such as by imposing stricter credit standards and regulatory requirements on banks. \u201cWhether that was successful or not, we\u2019ll see next year. But for the moment it gave Nabiullina an opportunity to keep the rate unchanged, to please the industrialists, politicians and President Putin himself, and just sit and wait.<\/p>\n\n\n\n
\u201cI think the chances of the rate going up at the next meeting are pretty high.\u201d<\/p>\n\n\n\n
The bank next holds a policy meeting Feb. 14.<\/p>\n","protected":false},"excerpt":{"rendered":"
Russia\u2019s central bank has left its benchmark interest r […]<\/p>\n","protected":false},"author":1,"featured_media":3591,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-3590","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-test"],"_links":{"self":[{"href":"https:\/\/www.viewworld.org\/index.php?rest_route=\/wp\/v2\/posts\/3590","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.viewworld.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.viewworld.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.viewworld.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.viewworld.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3590"}],"version-history":[{"count":1,"href":"https:\/\/www.viewworld.org\/index.php?rest_route=\/wp\/v2\/posts\/3590\/revisions"}],"predecessor-version":[{"id":3592,"href":"https:\/\/www.viewworld.org\/index.php?rest_route=\/wp\/v2\/posts\/3590\/revisions\/3592"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.viewworld.org\/index.php?rest_route=\/wp\/v2\/media\/3591"}],"wp:attachment":[{"href":"https:\/\/www.viewworld.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3590"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.viewworld.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3590"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.viewworld.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3590"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}