The Russian Central Bank stands firm against Bitcoin

When the Russian Central Bank announced that it would not touch the 21% interest rate, it surprised many. People expected an increase of perhaps 22%, or perhaps higher. But no. They stuck to their guns. What’s going on here? Let’s dive into their reasons, because it says a lot about how they’re managing the economy right now.

Why keep it at 21%?

The central bank had three options on the table: leave the interest rate as is, raise it to 22%, or raise it to 23%. In the end, they chose to settle down. Governor Elvira Nabiullina explained the logic. She cited slowing credit growth as a major factor. Basically, people are not borrowing as much. Deputy Governor Alexei Zabotkin supported her, saying the latest data shows the current rate is already doing its job. They are playing a cautious game here. Raising interest rates further could hurt more than help.

High prices: a necessary evil or an exaggeration?

This is where things get difficult. Nobody likes high interest rates. They make loans expensive and slow economic growth. But Nabiulina insists it’s worth it. Why? Because inflation is still a problem in Russia, the economy needs to remain balanced.

She also acknowledged the criticism. “Yes, these rates are difficult,” she admitted. But it’s also temporary. According to her, the policies put in place since mid-2023 are already starting to have an impact. The key is patience. Getting inflation under control does not happen overnight, especially in an economy like Russia’s that faces unique challenges.

However, if inflation does not ease soon, the bank has a backup plan. Nabiulina calls it “Plan B”, which basically means sticking with the current approach for now, and adjusting it if necessary.

What about the ruble?

Currency stability is another piece of this puzzle. The central bank adheres to a floating exchange rate policy. This means that the market decides the value of the ruble, not the bank.

Some worry that this could weaken the currency. But Nabiulina is not too worried. She believes that trade balances – the volume of Russia’s exports versus its imports – are more important. Now, there is no reason to panic. The ruble maintains its position.

The central bank’s view of Bitcoin

The Central Bank of Russia has made a bold statement and crypto enthusiasts may not be happy about it. They have made it clear that they do not want to use Bitcoin or other cryptocurrencies for local payments. They ignore cryptocurrencies because they are concerned about the risks and regulatory issues. Just a few days ago, A Vice suggested Create a Bitcoin reserve. This happened after President Putin expressed his support for Bitcoin. Russia works for something different Encryption regulations For use in foreign trade only.

What’s next?

For now, the central bank seems focused on waiting things out. They are betting that their current strategy will control inflation without disrupting the economy. Will you succeed? Only time will tell. But one thing is clear: they are walking a tightrope, trying to balance growth, inflation and currency stability simultaneously. The important thing to note is that their position is different from that of the head of state.