(Moscow-on-Thames) Pity the central bankers. In a recent policy briefing, the Central Bank of Russia fretted openly that monetary policy – specifically, the Bank’s ability to stimulate or dampen economic growth by manipulating lending rates and the money supply – was losing touch with Russian households. At fault, according to a report by Bloomberg (which, credit where it’s due, broke the story), is inequality, which has grown to such a high level that those who can afford to borrow don’t need to, and those who might need to can’t afford it. Thus, whatever the CBR might decide to do with interest rates wouldn’t matter much.
That, though, is only the tip of the iceberg. Elsewhere in their report, the CBR writes (in typical central-bankese):
The clarity of the signal from the key rate to the financial sphere and its influence on the activity of enterprises and households depends greatly on the role of the financial sector in the movement of financial resources in the economy, and in the formation of savings and credit. As such, an important condition is the trust placed by the population and businesses in financial intermediaries.
In other words, monetary policy only works if people trust banks. And people don’t trust banks. In a survey from WCIOM (also cited by Bloomberg), some 61% of respondents said that now is a better time to save than to spend, but only 38% said they would put their savings in a bank. Russians are, of course, well aware that their mattresses don’t pay interest, aren’t ensured against loss and won’t help them build a credit history – and yet into the mattress it goes. […]
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