The Central Bank recorded a simultaneous increase in consumption and savings among Russians

During its March meeting, the Board of Directors of the Central Bank pointed out an atypical situation in which at the beginning of 2024 Russians simultaneously increased consumption and savings in the context of high income growth. This is stated in summary discussing the decision to maintain the key rate at 16%.

“Additional incentives at the beginning of the year were created by significant indexation of social payments and traditional bonuses at the end of the year. Participants noted that for a more pronounced slowdown in inflation, the preponderance should be in favor of savings,” the Central Bank says in its materials.

Members of the board of directors of the Central Bank agreed that the impact of tight monetary conditions on savings and lending activity will be especially pronounced in the coming months. To return inflation to the target level of 4%, it follows from the discussion, a higher level of real interest rates is necessary.

On March 22, the Central Bank decided to keep the key rate at 16%, as inflation pressure remains high. Head of the regulator Elvira Nabiullina admitted reduction of the key rate in the second half of 2024. Risks for the Russian economy are still shifted towards pro-inflationary ones, noted Mrs. Nabiullina.

Read more about the situation in the Kommersant article. “Key bet without hesitation.”

Lusine Balasyan