- Reshetnikov warns of risks in Russia’s tight monetary policy.
- High interest rates risk economic “hypothermia”.
- Impact visible in major export reductions.
Russia’s Economy Minister Maxim Reshetnikov has expressed concerns regarding the risk of “economic hypothermia,” attributed to the central bank’s high interest rates. These policies, originally meant to combat inflation, might now overcool the economy.
He stressed the necessity for the central bank to consider slowing inflation when setting interest rates. President Vladimir Putin also highlighted these concerns in previous statements, emphasizing the need for potential rate adjustments. As Putin stated,
“We need to avoid freezing the economy as if it were in a cryotherapy chamber.”
The current economic policy, maintaining a 21% benchmark interest rate, affects sectors significantly, with exporters like Rusal and Gazpromneft reducing shipments due to subdued demand. This situation highlights the broader economic impact.
Political and financial tensions persist in Russia as authorities balance controlling inflation with economic growth. High rates remain contentious, reflecting public and political interference in monetary policy decisions.
Economic experts watch the central bank’s upcoming June meeting closely, anticipating policy shifts. The Ministry of Economic Development forecasts inflation at a realistic 7.6%, indicating cautious optimism.
Historically, Russian economic cycles oscillate between overheating and cooling, as seen in 2024’s high-growth period. Current conditions demand astute policy adaptations to ensure stability amid international pressures. Reshetnikov pointed out,
“We expect that this will be taken into account by the Central Bank in time when making decisions. As we also see risks of overcooling of the economy in the current regime.”
