Russia's central bank raises interest rate to 21% to fight inflation boosted by military spending
Russia's central bank raises interest rate to 21% to fight inflation boosted by military spending
Russia’s central bank has raised its key interest rate by two percentage points to a record-high 21% in an effort to combat growing inflation.
This is probably the clearest indicator we have that the Russian economy is really struggling.
This is the highest key interest rate in Russia since it was introduced
It's just about 3 months ago the Russian central bank increased interest from 16 to 18%, and about a month that it was increased to 19%, and now to 21%! That's a HUGE increase in very short time.
The central bank said in a statement that “growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services.
Meaning the economy can't handle the demands put on it by the war on Ukraine.
inflation expectations continue to increase.
Meaning the value of wages is undermined. Making the average Russian poorer.
Nabiullina noted that inflation has overshot the goals because of increased government spending
Meaning the government is over spending, and the economy can't sustain current levels.
As I mentioned last time, it's notable that the Ruble doesn't increase significantly in value after these increases. As I have claimed earlier, this is a sign it will get worse, and it's gotten worse as predicted, and it will continue to get worse until the Russian economy collapses, or overspending ends because the war against Ukraine ends.
EDIT:
For comparison Ukraine had interest rates above 20% in 2022 and 2023:
https://tradingeconomics.com/ukraine/interest-rateBut Ukraine was invaded and is getting it under control, probably in part due to foreign aid, now it's a more moderate 13%
So Ukraine is stabilizing, while Russia is getting worse.I'm actually damn surprised that Ukraine is able to keep their interest rates that low.
Absolutely, Russia originally had a massive advantages over Ukraine, because Russia had prepared for this, and has a bigger economy.
Ukraine was caught off guard. Remember they criticized USA for warning that a Russian invasion was eminent.
Nobody (almost) believed Russia would do this. So the Ukrainian economy was hit extremely hard, but is now doing better than Russia. And yes that is damned impressive.
When you do lots of deficit spending, the sustainable way is to use it to rebuild your country and strengthen it. Sending your most capable young men into Ukraine or in weapons factories, making expensive stuff that does nothing but explode, or stuffing propaganda money up people's assholes to puppeteer them, does little for your country except extract everything of value and leave most of the country with nothing.
I'm no fan of China, but at least using large amounts of government funds to build needlessly fancy bridges, buildings, tunnels, railroads and highways brings prosperity and resilience to vast swaths of your country that you might be able to use later.
Except in China a fair percentage of those are tofu dreg construction.
Fuck russia.
I need more butter for my schadenfreude popcorn. 🍿🍿🧈🧈
We might actually see another hyperinflation.
They are pretty far from hyperinflation. Inflation has not even officially hit double digits.
Yes the Russian national bank is handling this very well, and that helps prevent hyperinflation.
Technically hyperinflation is 50% monthly inflation for at least 1 month. But there may be other definitions?But if the Russian government persist in stressing the economy beyond what it can handle, there is a breaking point, where hyperinflation is a possibility, and not even their brilliantly led central bank can prevent it.
Putin is obviously not as smart as we once thought, and he is out of good options. He may not be able to deal with this effectively, maybe not even rationally. He may turn to Hitler strategies, where Hitler moved military forces that didn't exist around on the map. But Putin might do it with the economy too.
There have been indications that Putin is living in a fantasy world, where he thinks he can bend reality by force of will.
Russia is teetering on the brink of it right now.
Proposed Swift network replacement BRICS Clear would die in its cradle.
Oh no lol.
Fuck them. Let them eat grass and sand