Significant gap between lending rates, inflation not a sign of excessive monetary tightness - Central Bank of Russia

MOSCOW. July 1 (Interfax) - The significant gap between nominal lending rates and the rate of inflation is not in itself a sign of excessive monetary tightness, the Central Bank of Russia said in a summary of its key rate discussion.

Discussants said some loans were provided on preferential terms and were not very responsive to changes in the key rate - interest on more than a quarter of long-term corporate loans issued since the beginning of 2025 has been lower than interest on deposits.

"So higher rates are required in the market segment to moderate aggregate demand," the regulator said.

It is more appropriate to assess real interest rates relative to inflation expectations, since decisions regarding savings and borrowing reflect expected price growth, it said.

The business and banking community have repeatedly mentioned high real interest rates - the difference between nominal interest rates and the inflation rate - and have urged the Central Bank to lower the key rate more actively.

Sberbank chief Herman Gref again raised this issue on June 30. "My point of view is that the economy cannot exist for long at extremely high rates, real high rates that exist today. And our real rates are around 10%; that is, the Central Bank of Russia's policy rate minus current inflation. And 10% is a rate that can be applied in the short term in order to cool the economy. What we see today, in my opinion, is quite obvious - we have already overcooled the economy. And the rate needs to be lowered," Gref said at the annual meeting of Sberbank's shareholders.