CBR raises key rate

25.07.2014

On the 25^th of July the Board of Directors of the Central Bank of Russia (CBR) has decided to increase the key rate to 8.00% per annum. This decision is due to the fact that, despite the slowdown in consumer prices in July 2014, the risk of inflation has increased in the country. The growth of these risks are associated with geopolitical tensions and its possible impact on the dynamics of the currency rate.

The decision taken is aimed at slowing the growth of consumer prices to the target level of 4.0% in the medium term. If inflation risks remain high, the Bank of Russia may continue to increase the key rate.

The next meeting of the Board of Directors of the Bank of Russia, which will address the issue of the level of the key rate, scheduled for September 12, 2014.

Source: http://www.cbr.ru/press/PR.aspx?file=25072014_133011dkp2014-07-25T13_00_55.htm

Expert’s opinion

The lower the key interest rate - the more credits get into the economy. Respectively, and vice versa is true: the high rate of the Central Bank will raise the price of money for the economy.

By itself, the measure is intended to "cut inflation fat" from the sides of "fat rabbits". In the short term, this will lead to an increase of savings of "wolves".

But in the medium term, this will lead to the departure of "fat rabbits" from the forest. And in the long term - "wolves" will have no one to tear up the sides from, for the remaining livestock business-rabbits will no longer be "fat". If not all of them along with the capital will leave, where they will be groomed, nurtured and helped to grow not only Salo but also valuable fur.

Overall - displace credit programs. Invest in foreign assets. From thoughts go for actions of obtaining residence permits abroad. We have good suggestions, call us, write to us, schedule meetings. Experts will advise you.

Yaroslav Lomakin ( Managing Partner, Honest&Bright)