The Central Bank called it dangerous to lower the key rate at the moment

Reduction of the key rate now poses a threat to the economy due to the labor shortage. This was stated by the Central Bank of Russia (CBR) on December 24 in response to a request from CPRF State Duma deputy Denis Parfenov.

"It is dangerous to reduce the key rate for additional demand stimulation now, when demand already exceeds supply capacity," the text of the Central Bank's letter reads, cited by RIA Novosti.

The regulator explains that the loans, which will become cheaper from lowering the rate, will only give producers new money, but not provide them with resources, even if these funds are directed to investment. The Central Bank pointed out that Russia lacks labor, transport capacity and equipment, and lending at a low rate will only increase the struggle of enterprises for all these resources - only costs and prices for finished products will increase, reports "Gazeta.Ru".

The Central Bank noted that raising the key rate will not reduce the production potential of the Russian economy, but will only slow down demand, which is growing at too high a rate. The regulator expects that in 2025 in Russia the growth rate of gross domestic product (GDP) will fall to 0.5-1.5%, reflecting the reduced dynamics of demand.

The regulator pointed out that the expansion of concessional lending in an overheated economy and limited physical resources may require an additional increase in the key rate and maintaining its high level in order to bring inflation back to the target.

Increasing the number of concessional loans will at the same time cause an increase in the cost of ordinary loans, so subsidized loans should be limited and used only to address the highest priority issues.

Surprise affect: whether the Central Bank will raise the rate in February after a pause

Why the Bank of Russia decided to keep the key rate at 21% despite forecasts and what consequences this will have

Earlier, December 20, Central Bank head Elvira Nabiullina said that the regulator decided to keep the key rate at 21%, and this will ensure lower inflation in the coming quarters. She noted that the Central Bank did not change the rate to assess how the economy is adjusting to the new conditions. Nabiullina said that in November, the rate of lending sharply decreased and? It takes time to assess how steadily it has decreased.

The head of the regulator noted that the Central Bank may return to the issue of raising the key rate in February.

In a conversation with Izvestia on the same day, economist Andrei Barkhota called the Central Bank's move to keep the rate unobvious and suggested that it increases the likelihood of a rate hike in the first quarter of 2025.