There is no rational basis for the idea that a low key rate will revive economic...

“There is no rational basis for the idea that a low key rate will revive economic growth.” An expert on Dozhd discusses the rate cut and Central Bank policy

It is in the Central Bank’s interest to lower the key rate gradually or leave it as it is, in order to preserve Russians’ confidence that someday, with a low rate, the country’s economy will “start growing back,” economic commentator Vyacheslav Shiryaev believes.

🔹The expert pointed to Turkey as an example, where the key rate is 37%, economic growth is nearly 4%, and has remained above the global average for several years.

“Why, with a rate 2.5 times lower than Turkey’s, does Russia have a recession rather than economic growth? I think that starting sometime in May, the prevailing mood will become that the problem is not actually the rate. For now this is not mainstream; right now only those economists who can tell the truth are saying there is no direct link,” the expert said on Dozhd.

🔹According to Shiryaev, a gradual rate cut has a “psychological effect” on society:

While all economic actors in Russia — from housing developers waiting for cheap mortgages to carmakers waiting for cheap subsidized auto loans to boost car sales — are hoping that the rate will be lowered any moment now and “we’ll all start living, we’ll all bounce back,” it makes them get up and go to work in the morning .

Now imagine a situation where tomorrow Elvira Sakhipzadovna came out and said: we are lowering the rate to 8%; we will simply cut it in half — are you happy, isn’t this what you wanted? And then it suddenly turns out that economic growth does not resume, that the recession continues just as before. That would immediately cause a sharp collapse in sentiment, and the economy is always about sentiment, trust, and psychological factors that influence economic actors’ decisions.

🔹The expert suggested that the economic bloc of the Russian authorities will also make “greater efforts” in the field of statistical manipulation so as “not to upset” Putin:

“They will lie more, draw more, manipulate statistics more. It is no coincidence that Nabiullina’s speech included the phrase that we see signs of a recovery in [economic] growth. Naturally, no one except Rosstat will see these signs. Enterprises will continue to buckle, shut down, and show tens of billions of rubles in losses.

But the government will more actively draw up, through its Rosstat, some other indicators that have nothing to do with reality, because the tsar must not be upset. The tsar must not be offended with figures, or have the consequences of his criminal policy shoved in his face.”

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