Monetary conditions ease in August
As of the end of August, monetary conditions eased on average. This was largely because, in July, the Bank of Russia decided to reduce the key rate by 150 bp to 8%, which affected credit and deposit rates. This is stated in the Bank of Russia’s information and analytical commentary Monetary Conditions and Monetary Policy Transmission Mechanism.
In July, households’ propensity to save slightly decreased: the inflow of funds into banks continued, but was weaker than a month earlier. This was due to the ongoing reduction in deposit rates, seasonal expenses during the holiday period, preparations for the school year, and a decrease in foreign currency balances in accounts and deposits. Concurrently, customers were still transferring their funds from short-term ruble deposits opened in March—April at high interest rates to current accounts and long-term deposits.
In July—August, banks also cut interest rates on loans, responding to the changed interest rates in the money and stock markets. Subsidised lending programmes played a significant role in certain market segments. In these conditions, the growth of corporate and retail lending continued.
Increased lending activity coupled with the expansion of the budget deficit sped up money supply growth. The latter was driven primarily by the ruble component. This trend increases the efficiency of the transmission mechanism, mitigating the impact of the external economic environment on the preferences of households and businesses.