The Russian central bank has raised interest rates again. The increase turned out to be greater than analysts had expected. At the same time, military spending is increasing.
Prices in Russia continue to rise and the ruble remains very weak. That is why the central bank decided to raise interest rates again.
Major interest rate hike in Russia
For example, Russians are faced with increasingly expensive loans and many of them are losing the opportunity to take out a loan. Just a few months ago, the key interest rate in Russia was not much higher than in Poland and was less than 8%. Now it is almost twice as high: from Friday it is 15%. This represents an increase of 2 percentage points. compared to the previously applicable rate
In justifying the decision, the Central Bank of Russia said inflation pressures had increased “significantly,” exceeding previous forecasts. He argued that this is partly caused by increasing expenditure due to Western sanctions related to the “special military operation”, as the Kremlin calls the invasion of Ukraine.
Predicted inflation
The US news agency Reuters points out that although the ruble recovered some of its previous losses in October and the exchange rate is now below one hundred, the values of the Russian currency are still close to historical records.
According to estimates by the Russian Central Bank, inflation will reach 7-7.5% in 2023. Previous forecasts pointed to the possibility of slowing increases to 6%.
Record military expenditure
On Thursday, the Russian parliament adopted the draft budget for the period 2024-2026 in its first reading. The document predicts record military spending.
– Total spending on national defense will reach 10.8 trillion rubles (about PLN 450 billion) in 2024 and will increase significantly compared to previous years, Russian Finance Minister Anton Siluanov said on Thursday. He added that this amounts to 29 percent. budget and will be assigned to the “main task”, namely “ensuring victory”.
Moscow plans to finance the deficit with internal loans and from the National Welfare Fund. According to the law, the budget deficit coverage in this three-year period will be about 4 trillion rubles per year.
The draft budget for the next three years “specifies financial resources to solve the main problems facing the country, primarily to support citizens and the economy, ensure security and ensure the sustainable functioning of state institutions” , said Minister Siluanov.
The politician added that before the start of the special military operation (as the Kremlin calls the war in Ukraine – ed.) national defense spending was half and amounted to 14%. budget expenditure.
Source: Do Rzeczy
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
