MOSCOW, August 8. /TASS/. The dramatic key rate cut by the Bank of Russia to zero will lead to demand growth above domestic production and entail the rise of inflation, Deputy Governor of the Central Bank Alexey Zabotkin said on the Telegram channel of the Bank of Russia.
"The idea of a loan at the zero interest rate appears attractive but the deposit at the rate of 0% and current inflation is not so much luring. If all the rates in the economy are dramatically lowered to 0%, then people would not want to save money in rubles. It would be more logical to spend money quicker and this will boost the demand too abruptly - much higher than domestic production can expand, and it means that everything will again result in the price hike. Inflation may not merely grow but go out of control. We saw such examples in the recent history of individual countries," he said.
Risks for financial stability are possible also. "The banks in any case will not be able to proactively provide the economy with loans without having a stable deposits base. Rates for ultimate lenders in the economy will eventually become higher and not lower against inflation and risks growth. That is why we reduce the key rate cautiously and in a balanced manner," Zabotkin added.