On October 25, 2024, the Central Bank of russia raised its base interest rate to 21 per cent. This is the highest rate since the start of the full-scale invasion and reflects the CBR’s concerns about growing inflationary pressures in russian economy. CBR governor Elvira Nabiullina said that “more drastic changes” to monetary policy might be required to get inflation under control. However, there is growing criticism of the CBR’s decision to keep interest rates high from key business executives across multiple russian industries, the UK Defense Intelligence reports.
High interest rates in russian economy are highly likely to restrict business investment and growth. Since the beginning of the war in 2022, the volume of corporate loans and the proportion of them tied to the CBR’s base rate have increased. As a result, higher interest rates are leading to increasing costs of debt. These costs are highly likely exacerbating financial pressures on businesses, with corporate bankruptcies in russia reportedly 20 per cent higher in 2024 than they were in 2023.
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Inflationary pressures will highly likely continue to intensify in 2025 as government spending is forecast to increase, and labour shortages and pressure from sanctions persist. This will lead to increasing trade-offs between efforts to control inflation and supporting growth of russian economy.
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