«For the poor — evil, for the rich — good»
On Friday, July 26, the Bank of Russia decided to raise the key rate from 16% to 18% at once. Moreover, the increase took place after a pause that lasted 7 months. The last time the key rate was so high was in the spring of 2022, shortly after the start of the SVO. The goal of the current increase is to bring down inflation, which, despite all the efforts of the regulator, does not give up and, according to Rosstat, has already exceeded 9% in annual terms. If before May of this year the market expected a reduction in rates already in the summer, now few people hope for a reduction in them in the coming quarters. Maxim Osadchiy, head of the analytical department at BKF Bank, told MK what Russians can expect from the recent increase in the key rate.
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— There is a significant difference between them: in 2022 there was a “peak-shaped” increase in the key rate, while a year ago a relatively slow rise to unknown heights began.
«A peak-shaped» increase in the rate is an effective financial therapy tool that acts like a scalpel that removes a tumor. We observed the positive effect of such a maneuver in the spring of 2022, immediately after the start of the SVO, when the Central Bank managed to instantly overcome the panic in the financial market and prevent the development of a financial crisis with the help of a sharp tightening of monetary policy. If before the sharp increase in the key rate, Russians «gutted» ATMs and «ran into banks», as a result of which there was a powerful outflow of funds from there, then immediately after the increase, the process turned 180 degrees — queues of depositors opening deposits at 20% and per annum grew in banks.
Then the Central Bank of the Russian Federation, having taken control of the situation, quickly returned the key rate to the pre-crisis level and even lower. And now there is no need to talk about any «peak-shaped» increase in the key rate, the rate has been increasing relatively slowly for more than a year. Moreover, prolonging the period of high rates weakens the positive effect of a possible reduction in inflation.
— The logic is simple. Immediately after the rate is raised, people place their free money in bank deposits, thereby reducing demand for goods and services and helping to ease inflationary pressure. But then, with a delay of 2-3 months, a negative effect appears: the growth of interest expenses contributes to the growth of prices. (That is, the payment of loans at high rates, which businesses include in the cost of all their goods and services, begins to affect prices. — MK). We mentioned the scalpel here. So, if you pick at the wound with a scalpel for months, then there will clearly be no benefit from such treatment.
But the Central Bank has no other options: due to rising inflation, it is forced to raise the key rate higher and higher. The treatment does not achieve its goal — reducing inflation — because the regulator's tight monetary policy is not tight enough to counter the Finance Ministry's excessively soft fiscal policy. The reason for the current inflation is that the state is living beyond its means. And the Central Bank has no right to «get tough», since a sharp increase in the key rate, say, to 40%, could lead to a debt crisis.
— Indeed, according to the latest Rosstat data, published just the other day, for the first time in Russia there are no households that do not have enough money for food, and the number of those who have enough money to meet all their needs is at multi-year highs. Of course, we would like to see at least one person who “has enough money to meet all their needs.” But, of course, it is nice to know that no one is fighting over expired goods at the trash bins of stores anymore. We know that high inflation primarily affects the poorest, because they do not even have enough money for food. Unlike wealthier people, they cannot reduce other expenses or take money out of their nest egg.
— For the poorest, who cannot even borrow money from microcredit organizations (MFOs), it is rather positive, since the growth of the key rate helps to weaken inflationary pressure. But for the poor, it is rather negative, since their debt servicing costs increase. Let me remind you that the poor mostly borrow money from banks and microfinance organizations, while the rich, on the contrary, mostly lend to banks, opening accounts and making deposits there. Therefore, for the poor, the growth of interest rates is evil, and for the rich, it is good.
— Yes, and it is alarming. The growth of the debt burden on the poor, who are the main audience for such a loan, may lead to the fact that they will not be able to cope with the unbearable burden of debt.