Today, the Bank of Russia raised the key rate from 18% to 19% per annum. Whether this decision will somehow help curb inflation, economist Nikita Maslennikov, head of the Finance and Economics Department at the Institute of Contemporary Development, told Pravda.Ru.
“It is quite difficult to predict the situation now,” he admitted. “Because, of course, there is a certain tendency for the economy to weaken, but it is going at a sparrow’s pace, because in July our annual inflation was 9.13%. In August we finished at 9.05%. There are certain risks.”
The deflation at the end of August should not fool anyone: it is purely seasonal and has already been replaced by inflation, albeit still microscopic.
“Therefore, the risks, to put it carefully, of pro-inflationary pressures prevail over deflationary ones. The Central Bank’s forecast for this year is 6.5% to 7% at the end of the year. But judging by how things are going now in terms of prices, inflation does not want to go down yet.” – the expert noted.
He doubted that the Central Bank’s forecast would be met, but acknowledged that the decision to raise the rate was correct:
“Because if you don’t raise the key rate, you will live with constant high inflation. In addition to the key interest rate, preferential loans also play a role; because our demand is growing due to rapid wage growth due to labor shortages. But supply is lagging behind. Unfortunately, this pattern of supply lagging behind demand will continue over the next year. Therefore, even the Ministry of Economic Development’s forecasts that inflation will be 4.5% next year raise big questions.” – the specialist pointed out.
High inflation worsens the investment climate; without investment, it is impossible to increase labor productivity, which, in turn, creates inflationary pressure. Maslennikov is confident that coordinated actions by the Central Bank and the government could break this vicious circle.
“We raised the income tax to 25%. About 54% of all capital investments come from profits. So I ask the question: what will happen with this tax rate? Will your investments grow?” – he gave an example. “Therefore, naturally, the level of coordination between the Central Bank and the government, in my opinion, will be crucial today to reduce inflation and improve the quality and standard of living.”
