Backgrounds of the High-Interest Policy
- Inflation Pressure: Consumer prices continue to rise by over 10% per year, with forecasts for 2025 expecting an average inflation of 7-8%.
- Consequences of War: Increased military spending, sanctions, and a labor shortage (due to draft call-ups and emigration) drive up wage costs and prices.
- US Trade Tariffs: The global trade conflicts triggered by Donald Trump increase the risks for the Russian economy, according to the central bank.
Economic Impacts
| Aspect | Description |
|---|---|
| Companies | Criticism of high credit costs that hinder investments. President Putin admits that growth in 2025 will be “somewhat lower.” |
| Monetary Policy | The central bank emphasizes a “as tight as necessary” policy to push inflation to its target level by 2026. |
| Global Context | The US tariff policy exacerbates global trade uncertainties, affecting commodity markets and currency exchange rates—also relevant for the RUB/USD exchange rate. |
Paradoxical Effects
Despite the record interest rate, inflation expectations remain high:
“Consumer price expectations […] have continued to rise despite record-high borrowing costs.”
This suggests a vicious cycle:
- High military spending → State deficit → Expansion of money supply
- Labor market bottlenecks → Wage-price spiral
- Sanctions → Increased import costs
The interest rate policy alone cannot solve these structural problems, as even Putin implied in talks with central bank chief Elvira Nabiullina.
Global Relevance
For international markets, Russia’s situation is an indicator of how geopolitical tensions (Ukraine war) and protectionist measures (US tariffs) can amplify inflation dynamics in emerging markets—with feedback effects on commodity prices and capital flows.