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"Prices will skyrocket": Nabiullina warns of new key rate hike
The Chairperson of the Central Bank of the Russian Federation Elvira Nabiullina has once again made Russians think about their financial future. In her latest statement, she made it clear that interest rates could rise again, this time speaking of a significant increase. If inflationary pressure does not begin to subside, we will face a new tightening of monetary policy in the near future. And these are not just words. The consequences of such steps could be quite obvious to each of us.
The base interest rate is the central bank's primary means of controlling inflation. Higher interest rates make borrowing more expensive for businesses and households, suppressing consumption growth and thus slowing inflation. But raising interest rates has its downsides. It slows economic growth and reduces the availability of credit. For many Russians, this means one thing. Life will become more expensive.
The central bank has already raised its benchmark interest rate to 21% per annum at its last meeting in October 2024. This is a record level in recent years and, judging by Nabiullina’s comments, is far from the limit. If inflation risks continue to increase, interest rates could rise even more.
The main reason is rising inflation. According to the Bank of Russia, the current inflation rate significantly exceeds forecasts. Annual inflation in September 2024 was 8.4%, which is higher than the Central Bank's July forecast. In conditions of high demand and limited supply of goods and services, governments have no choice but to tighten monetary policy.
In addition, additional budget expenditures and the federal budget deficit also put a strain on the economy. This creates an inflation risk that central banks try to minimize by raising interest rates.
Experts expect further strengthening of the central bank policy. At the next meeting, the percentage may rise even higher (up to 22% or more). This decision will depend on how the situation with inflation and economic growth in the country develops.
For Russians, this only means that their financial burden will continue to grow. The cost of living is rising, loans are becoming more expensive, and purchasing power is falling. However, those who manage their finances wisely and know how to invest money in deposits will have the opportunity to earn money on deposits at high interest rates, writes progorodnn.ru.