The key rate remains high. Answers to the main questions

The Central Bank's key rate has been kept at 21%, the maximum rate in the history of the regulator's activity, which was set in October. The business community opposes such measures, claiming the danger of a rate hike and the risks of overheating the economy. Why regulate the key rate, why it is necessary to fight not with inflation, but with expectations, and what other tools the Central Bank has at its disposal - in the Izvestia article

Why does the Central Bank raise the rate?

- The key rate is the minimum interest rate at which the Central Bank issues loans to commercial banks. The more expensive money is for banks, the higher will be the rates on bank products - loans and deposits. As the rate rises, high interest on loans scares away potential borrowers, while deposits, on the contrary, become more profitable: the population starts saving instead of spending, as a result of which demand falls and inflation decreases.

- The purpose of raising the key rate is not so much to reduce inflation as to influence inflation expectations, which play a major role in the growth of the cost of products and services. For example, when a person expects prices to rise, they negotiate for a wage increase, and the employer puts the increased costs into the cost of production, which eventually causes prices to rise.

Money downtime: price expectations of enterprises in Russia have increased

How it affects the economy

- Inflation is not only influenced by the expectations of consumers, but also of businesses and markets. By raising the key rate, the Central Bank wants the market to adapt and more and more people to adopt a savings strategy: those who have savings have lower inflation expectations.

- In 2024, the Central Bank raised the rate three times - in July to 18%, in September to 19% and in October to 21%. But the situation with the demand for loans was reversed only in November: retail and corporate lending slowed down, the latter for the first time since the beginning of the year. In addition, the volume of funds on deposits increased due to more attractive rates.

- Economists expected that in December the Central Bank would raise the rate again, as inflation continued to rise. But the regulator decided to keep it at 21%, noting that the tightening of monetary policy in the second half of the year was influenced by other factors. These are stricter requirements for banks' liquidity (i.e. availability of sufficient cash to pay off their liabilities. - Ed.) and higher requirements to borrowers.

Betting on bankruptcy: are companies at risk of default due to the Central Bank's policy?

Analysts are not inclined to dramatize the situation, crisis is expected only in some sectors

Why is business against a high key rate?

- Business considers the key rate to be too high: due to the rising cost of loans, manufacturers put the increased costs into the cost of production and thus accelerate inflation. Now it is 9.5% in annual terms, despite repeated rate hikes. Critics of the Central Bank note that the market adaptation has already occurred and the key rate exceeds inflation expectations.

- One of the main factors of inflation growth, which is also referred to by the Central Bank, is the shortage of labor, due to which companies are forced to raise wages, and the increased costs are shifted to consumers. The rise in the cost of loans will not be able to change the situation in the labor market, but it will prevent companies from developing production, business representatives believe.

- The Central Bank objects: although the costs of companies are growing amid the tightening of monetary policy, on average over the last five years they have not exceeded 5% of the cost of production. In addition, the record revenue of companies, received last year, gives them a "high margin of safety".

Business lives on: "business deaths" have fallen to their lowest level since 2012

In which areas companies are most often closed and why it is becoming unprofitable to liquidate legal entities

- In the current circumstances, the gradual increase in the key rate was a competent and adequate step, but this measure alone is not enough to curb inflation, the expert community believes. Preferential lending to business, which is used by the regulator, compensates for the impact of the key rate, so the effect of it was not very noticeable.

What other tools does the Central Bank have?

- The regulator has repeatedly warned that financing companies solely at the expense of banks leads to business crediting. At the same time, there are wealthy private investors in Russia, whose funds can be raised by placing company shares on the stock market.

- The stock market is an important instrument of economic growth, but in Russia the sphere of private investment is still developing. Placing shares of domestic companies would not only attract additional funds for the development of enterprises, but would also make it possible to change the pension system in the future.

- In March, non-state pension funds were given the opportunity to invest in shares of domestic companies and build up capital through dividends. The Bank of Russia will make sure that pension savings are placed in the interests of citizens.

- In September, the Bank of Russia proposed to encourage companies to publicly place shares on the stock exchange with tax benefits and priority access to government financing programs. In December, the Kremlin also reminded about the need to involve large organizations in the placement of shares on the stock exchange. So far, mostly small companies have been involved in the IPO procedure (the first public offering), while representatives of large businesses have not been on the stock market.

- The Central Bank was instructed to work with the government to develop incentive measures for such companies, for example, to link the receipt of subsidies from the state or preferential loans with the entry on the stock exchange. Ensuring the protection of investors' rights and information transparency of companies will help to increase demand for securities.

- So far, preferential loans to enterprises are more profitable than preferential IPO, because the company-issuer (issuing shares. - Ed.) is required to submit financial statements for the last three years, pass an audit and provide access to current operations and transactions, business reputation of the company and competent organization of the work process are also important. In the future, financial statements will have to be disclosed every three months. Not all companies are ready for such openness.

In preparing the material, Izvestia talked to and took into account the opinions of:

• economist Alexei Rodin;
• economist Alexander Bystrov;
• economist Konstantin Ordov;
• Anton Tabakh, chief economist of the Expert rating agency;
• financial analyst and journalist Ivan Danilov.