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On the ineffectiveness of the fight against inflation, the rate and the ruble.
When the fight against deficit and credit makes the problem worse: ⛔️ When the budget specifically addresses the budget deficit, it indexes taxes, fees, duties and forecasts a depreciation of the exchange rate to fix a minimal deficit on paper. -> Inflation ⛔️ Russia fights the growth of lending by creating immediate demand for loans, especially preferential ones, by raising interest rates, reducing incentives for early repayment and increasing deposits. -> Increase interest income and money supply -> Increase future demand and inflation ⛔️ The Bank of Russia limits yuan swaps against foreign exchange lending and increases the yuan exchange rate to increase demand for currency, reduce sales of foreign exchange earnings and neutralize the effect of the ruble appreciation. Why sell the yuan if it brings in income comparable to the ruble? -> The 1:1 depreciation of the ruble is reflected in prices in the long term. -> Inflation on the chart. Since August, the yuan RUSFARCNY has soared by more than 200%, and the ruble has now stabilized at 18.5%, or about 14%, according to RUSFAR. Now Russian banks are also reducing the size of currency swaps to reduce bank lending in yuan. But now loans in foreign currencies have become safer. Borrowers will reduce the demand for ruble loans and create rubles. This means that there will be more assets in foreign currency to meet the demand for currency risk. This is partly due to the weakness of the ruble over the past month. The budget forecast had a greater impact, but the rate itself has reached the level that should be only in 2025 (above 95 rubles per dollar). It is too early to reduce the mandatory sale of foreign exchange earnings 🔑 The base interest rate should not be raised further. Further advances will lead to further inflation, which will lead to excessive costs for some and excess income for others. A significant portion of these costs is refinanced through new loans or price indexation. There are no significant restrictions for budget and state-owned enterprises in this regard. This is evidenced by the draft budget. The real rate is already ~10% (19% KS with inflation of 8-9%), it just needs to be brought to a comparable level. If you apply the annual percentage value with compound interest, the real interest rate will already be 11-12% (21% versus 8-9%). Such real interest rates did not exist either at the Fed in the 1980s or in Brazil in 2023. If real interest rates remained above 10% for a very short period of time, when inflation was falling, the real interest rate was 9-10%. Questions will be raised about financial stability. Many corporate borrowers and banks are experiencing problems. Ultimately, all this will have to be solved with new money and inflation. There are other measures that have proven effective, including restrictions on soft lending, budget deficits and credit growth, mainly to offset rising financial costs.replacing ruble loans with foreign currency ones - this is not what causes inflation. We can allow this instead of the clearly inflationary measures that are happening now and in the past.