The Russian Central Bank recently surprised many by keeping its 21% interest rate unchanged, despite expectations of a hike. This decision stems from the bank’s cautious approach to balancing inflation control and economic stability. Governor Elvira Nabiullina and Deputy Governor Alexei Zabotkin emphasized that the current rate is already effective in curbing inflation, pointing to a slowdown in credit growth as evidence that the economy is adjusting. They believe raising rates further could harm the economy more than help, and Nabiullina insists that while high interest rates are difficult, they are necessary for controlling inflation.
The bank is also sticking to its floating exchange rate policy, allowing the market to set the value of the rouble. While concerns about currency weakness persist, Nabiullina remains confident that trade balances will prevent major issues with the rouble's stability.
On the topic of Bitcoin, the Russian Central Bank has made it clear that it opposes using Bitcoin and other cryptocurrencies for domestic payments. Despite President Putin's recent support for Bitcoin, the bank remains concerned about regulatory risks and has rejected proposals, such as creating a Bitcoin reserve.
The Central Bank’s approach appears to be one of patience, aiming to control inflation without stalling growth. However, their stance differs from President Putin’s, signaling a disconnect between the bank’s caution and the President’s more crypto-friendly position. The outcome of this strategy remains uncertain, as they try to balance inflation control, economic growth, and currency stability.
