Doesn't the decrease signal an improvement for Russia? (unfortunately)
3
The_v @lemmy.world - 19hr
Its not really a signal for good or bad for the economy, it's a signal for what the central bank is trying to do. You have to look at the situation to know if it's good or bad.
Raising the interest rate is an attempt to decrease inflation by slowing down borrowing. Debt loads of companies/government entities increase due to the higher interest rate.
Lowering the interest rate increases the inflation rate buy allowing more borrowing. Debt loads decrease as the inflation rate devalues debts.
The Russian economy is under severe strain with oil revenue decreasing rapidly and debts loads piling up. Inflation pressure has been extremely high for years. The central bank is trying to decrease debt by allowing inflation rate to take off again. Lowering the interest rate while inflation pressure is very high is a desperate move to try to stabilize the economy in free fall.
10
Brainsploosh @lemmy.world - 18hr
I liked this explanation:
Inflation is a balancing act, too much inflation and money becomes worth too little to buy anything with, too low inflation and we don't have enough economic growth meaning not enough things for everyone.
So many governments use a central bank or similar to try to regulate inflation. They've tried many things, but the only tool that reliably works is the interest rates, affecting the cost of debt.
The tool is slow and not very effective, as many many things affect inflation, but it typically does something. Lower rates means cheaper money means interest goes up, and higher rates the opposite.
Most countries want an interest rate around 2%, Russia has had 19% and is currently at 5-7 %. Lowering the rates is expected to increase inflation even further which is bad for the Russian households that will need to work at least 5-7 % harder/longer to afford the same life next year.
What might be worse though is widespread bankruptcy and collapse of industries as they default on their debt due to high rates.
Russia is in a war economy and has forced several producers to retool and change production, basically for borrowed money. The state is then paying for this by injecting money (from savings) into the economy. These serve to make goods of living more scarce (fewer producers) and household money worth less (outside money only reaches a few who afford rising prices). While the producers are stuck with the interest of high debt, and rising costs of business.
This is a lesser evil bargain, and Russia is borrowing from it's own future to keep the war going.
Sunshine in ukraine @sopuli.xyz
Ukraine holds at 15.5% as Russia’s rate swings
https://euromaidanpress.com/2025/12/24/ukraine-holds-rate-15-5-russia-rate-swings/Doesn't the decrease signal an improvement for Russia? (unfortunately)
Its not really a signal for good or bad for the economy, it's a signal for what the central bank is trying to do. You have to look at the situation to know if it's good or bad.
Raising the interest rate is an attempt to decrease inflation by slowing down borrowing. Debt loads of companies/government entities increase due to the higher interest rate.
Lowering the interest rate increases the inflation rate buy allowing more borrowing. Debt loads decrease as the inflation rate devalues debts.
The Russian economy is under severe strain with oil revenue decreasing rapidly and debts loads piling up. Inflation pressure has been extremely high for years. The central bank is trying to decrease debt by allowing inflation rate to take off again. Lowering the interest rate while inflation pressure is very high is a desperate move to try to stabilize the economy in free fall.
I liked this explanation:
Inflation is a balancing act, too much inflation and money becomes worth too little to buy anything with, too low inflation and we don't have enough economic growth meaning not enough things for everyone.
So many governments use a central bank or similar to try to regulate inflation. They've tried many things, but the only tool that reliably works is the interest rates, affecting the cost of debt. The tool is slow and not very effective, as many many things affect inflation, but it typically does something. Lower rates means cheaper money means interest goes up, and higher rates the opposite.
Most countries want an interest rate around 2%, Russia has had 19% and is currently at 5-7 %. Lowering the rates is expected to increase inflation even further which is bad for the Russian households that will need to work at least 5-7 % harder/longer to afford the same life next year.
What might be worse though is widespread bankruptcy and collapse of industries as they default on their debt due to high rates.
Russia is in a war economy and has forced several producers to retool and change production, basically for borrowed money. The state is then paying for this by injecting money (from savings) into the economy. These serve to make goods of living more scarce (fewer producers) and household money worth less (outside money only reaches a few who afford rising prices). While the producers are stuck with the interest of high debt, and rising costs of business.
This is a lesser evil bargain, and Russia is borrowing from it's own future to keep the war going.