Andrey Zubarev, Senior Researcher of the Department for Digital Finance at the Gaidar Institute, revealed an anomaly in the impact of the Bank of Russia's key rate on inflation in a commentary to the Prime news agency. He believes that a rate cut accelerates price growth significantly more than a rate increase helps to curb it.
"Indeed, an asymmetry is observed: prices respond more evidently to stimulus measures rather than to tightening," the expert explained.
Andrey Zubarev identified several reasons for this phenomenon. First, the Central Bank's decisions influence the expectations of economic agents. During periods of monetary easing, market participants are prone to risk and impulsive trading, which feeds inflation. Second, rate cuts typically stimulate demand, while production lags behind, and shortages result in price increases, the expert explained.
Conversely, policy tightening stimulates savings behavior, which causes demand to fall and prices to rise less sharply. As a result, Zubarev concludes, "lowering the key rate in Russia should be done with caution."