Historical Surge in Deposit Rates in Russia
Recent data from the Central Bank of Russia reveals that the average maximum interest rate on ruble deposits at the ten largest credit institutions has reached a historic high of 21.56% per annum. This significant increase comes as banks have raised their deposit rates by more than one and a half times over the past year, up from an average of 13.64% in November 2023. The surge in rates is primarily attributed to the Central Bank's aggressive monetary policy, which has seen the key interest rate rise dramatically from 7.5% to 21% over the past year.
The Central Bank's tightening measures aim to combat inflation, which currently stands at approximately 8.8%, significantly above the government's target of 4%. As part of its strategy, the Central Bank has indicated that it may consider further rate hikes at its upcoming meeting on December 20, 2024. This tightening of monetary policy is expected to make loans more expensive, thereby encouraging savings and reducing overall economic activity, which could eventually help alleviate price pressures in the economy.
Impact on Savings and Economic Behavior
The rising deposit rates have led to an influx of funds into bank accounts, with the volume of money held by Russians in credit institutions increasing by about 700 billion rubles in October 2024, bringing the total to 52.9 trillion rubles. This trend reflects a growing preference for deposits as a safe and profitable means of saving money, especially in light of the recent abolition of transfer fees within the fast payment system, which has further incentivized individuals to deposit their funds.
Experts suggest that the current deposit rates not only provide a hedge against inflation but also present opportunities for real income growth. With rates on one-year deposits reaching between 20-23%, depositors can expect to preserve their purchasing power even if inflation exceeds current forecasts of 6.1-6.8% for 2025. The Central Bank's ongoing commitment to maintaining tight monetary conditions indicates that competition among banks for depositors is likely to intensify, potentially leading to even more favorable offers in the near future.
