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The effect of a key rate reduction on the Russian budget assessed

A key rate cut of one percentage point could save the Russian federal budget approximately 260 billion rubles, according to First Deputy Prime Minister Denis Manturov.

Manturov highlighted the potential positive impact of a rate cut on subsidy programs across various sectors, including industry, agriculture, and mortgages. He noted that the savings would provide additional resources for economic development.

While acknowledging the Central Bank’s efforts to curb inflation, Manturov pointed out the potential negative consequences of maintaining a high key rate for an extended period. He cautioned that a prolonged high rate could stifle economic growth in the real sector due to lack of affordable credit.

Manturov emphasized that the current high rate is not sustainable in the long term, as it could hinder the real sector’s development and limit the government’s ability to allocate funds for interest rate compensation.

On June 6, the Bank of Russia lowered the key rate from 21% to 20%, marking the first decrease in nearly three years.