Bank officials have pinpointed the lone strategy for curbing inflation.
In a fresh update, the Central Bank of Russia (CBR) has identified the root causes of inflation and suggested remedies to combat it. It's all about demand outgrowing a nation's economic production capacity—a common dilemma worldwide that necessitates tackling aggregate demand within the economy.
The Bank of Russia shared these insights through its telegram channel, articulating the necessity to confront inflation on a global scale by attending to aggregate demand. This important mission falls under the CB's jurisdiction, with a range of tools at their disposal, including manipulating credit rates.
So, what's the big deal about credit rates? They can drastically influence borrowing trends, and in turn, consumption and investment. By jacking up interest rates, the CBR can make borrowing an expensive proposition, which in turn, minimizes consumption and investment. This reduction in aggregate demand curtails inflation by controlling the flow of money in the economy and reducing the clamor for goods and services.
On the flip side, dropping interest rates can incentivize borrowing, spurring economic activity but potentially fueling inflation if demand skyrockets. However, lower rates can be tentatively lowered when inflationary pressures ease.
In June 2025, the CBR slashed its key interest rate from 21% to 20%, marking the first decrease since September 2022. This step was in response to abating inflationary pressures and signs of a slowing economy. Even with the rate cut, the CBR warned that the monetary policy will stay strict for quite some time, showcasing a careful approach to control inflation while promoting economic growth.
The CBR eyes reducing inflation from above 10% to a more manageable 4% by 2026. Fortunately, inflation has shown a downward trend—it fell to 9.8% in May 2025. Besides monetary measures, the CBR has employed non-monetary means to curb lending, contributing to the reduction in inflationary pressures.
In a nutshell, the CBR juggles economic growth with price stability via strategic interest rate adjustments. The rate cut hints at a relaxing of monetary policy to match improved inflationary conditions, while exercising caution to ensure sustained economic stability.
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The Central Bank of Russia (CBR) utilizes its telegram channel to discuss global inflation issues, focusing on the impact of aggregate demand on business and finance. In an effort to control inflation, the CBR can manipulate credit rates, making borrowing an expensive proposition to minimize consumption and investment, thus reducing aggregate demand.