SIMFEROPOL, 8 Jul. The likely increase in the Central Bank of the Russian Federation rate to reduce rising inflation will cause a burden on the budget and, as a result, will hit the Russian economy, it is necessary to stop the outflow of capital for devaluation of the ruble, Alexander Losev, a member of the Presidium of the Council on Foreign and Defense Policy, said on the air of the Sputnik in Crimea radio station.
The dynamics of the ruble exchange rate now carries pro-inflationary risks for the Russian Federation, the Central Bank will take this into account in decisions on the rate, Elvira Nabiullina, head of the Bank of Russia, said earlier.
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"If the key rate rises, we get such a negative vicious cycle. Financial stability is collapsing, inflation is on the rise, because the import component in the consumer basket is still very large … The world's leading central banks have printed a huge amount of dollars, euros, yen, and so on during the covid period and, in fact, by devaluing the ruble, we are essentially taking part of American and European inflation. When inflation rises, the Central Bank has no other leverage than to raise the rate — which is very painful for the Russian economy,» Losev said.
Losev expects that at the upcoming meeting of the Bank of Russia Board of Directors on July 21, the decision to raise the rate from the existing 7.5% to 8%, and possibly immediately by 1%. The expert considers this decision negative for the economy.
“Raising the rate can somehow reduce inflation — leaving part of the money in ruble deposits or possibly in federal loan bonds. But the problem is this: they raised the rate — the Ministry of Finance has increased spending. The Ministry of Finance, which must now finance a huge number of programs — if there is a shortfall in taxes, it must be financed by debt, by issuing federal loan bonds. Now the burden on the budget is increasing. There is nothing good in such inflation targeting — it hits the budget, the entire economy, all citizens,» Losev said.
The expert called on the government and the Central Bank of the Russian Federation to immediately stop the outflow of capital abroad to stabilize the ruble and conduct fiscal reflation to increase the economy and production.
According to the results of trading on Friday, the ruble rose against the dollar, but fell against the yuan; at the end of the week, the Russian currency fell against both the American and the Chinese: foreign currencies «closed trading» at 91, respectively .25 rubles and 12.65 rubles, follows from the data of the Moscow Exchange. Over the week, the dollar rose by 1.70 rubles, the yuan — by 32 kopecks, the euro — by 2.55 rubles.