The Bank of Russia, Novgorod authorities and enterprises discussed the prospects for reducing the key rate

A communication session on the monetary policy of the Bank of Russia was held in Veliky Novgorod. It was attended by about 300 people, including representatives of government bodies, Novgorod enterprises and specialists of the North-West Main Department of the Bank of Russia. The key topic was the state of the economy of Russia and the Novgorod region, as well as the factors that formed the basis for the June decision of the Bank of Russia to reduce the key rate to 20% per annum.

Speaking about the reduction of the key rate, Pavel Shaptala, head of the North-West Main Directorate of the Bank of Russia, noted that this is still a high level, which, nevertheless, is necessary to reduce inflation.

"Inflation in the country is gradually decreasing despite the fact that domestic demand still outpaces the supply of goods and services. Therefore, the monetary policy of the Bank of Russia will remain tight until the economy gradually returns to balanced growth. Such meetings in the regions are a necessary source of information about the specific situation on the ground: demand, production, personnel. They certainly help us in making decisions on monetary policy," emphasized Pavel SHAPTALA.

The meeting participants discussed in detail the situation in the region’s economy: what is happening with investments, lending, the labor market, and what impact this has on local businesses and Novgorod residents.

"High inflation has a negative impact on all companies without exception - the costs of purchasing raw materials, equipment, logistics, and wages are growing. Now the region's businesses are taking out fewer loans in the context of high interest rates. At the same time, we see that investment activity in the Novgorod Region remains at a high level, primarily at the expense of companies' own funds," states Vadim PIVOVAROV, Deputy Head of the North-West Main Directorate of the Bank of Russia.

He emphasized that only in conditions of moderately and predictably changing prices are more affordable interest rates on loans possible, since they directly depend on inflation.

"It is currently more profitable for citizens to save than to spend or buy something on credit, since deposit rates are currently attractive. They reach 19% per annum, which is significantly higher than inflation," added Vadim Pivovarov.

According to him, the point is that a high key rate helps to increase savings and cool the growth of lending. Thus, excess demand gradually decreases, and prices grow at a slower rate.

In general, annual inflation in May continued to decline across the country, but in the Novgorod Region it increased slightly – from 10.2% in April to 10.5% in May. According to Mikhail Starichkov, manager of the Bank of Russia branch in the Novgorod Region, this is influenced by the region’s specific features. The main reasons for the increase in annual price growth in the Novgorod Region include a reduction in the supply of certain products and an increase in demand for certain services. In addition, manufacturers continued to transfer their increased costs to product prices. According to the Bank of Russia’s forecast, annual inflation will decrease to 7–8% this year, return to 4% in 2026, and remain close to the target in the future.

The discussion was also attended by Yulia Alekseeva, Deputy Minister of Investment Policy – ​​Director of the Investment Department of the Novgorod Region, and Dmitry Meltsin, CEO of Gigafabrika, a company that produces high-tech electronic devices. In addition, a working meeting of the management of the North-West Main Directorate of the Bank of Russia with the Minister of Finance of the Novgorod Region Elena Silina was held as part of the communication session.

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