Giveaways only fuel inflation, the regulator has said
Handing out free money to people does not make them richer and is bad for the economy in general, Russia’s central bank has said in response to a question about inflation.
The financial regulator posted a brief lesson in economics on its Q&A section on Telegram, in response to the question, “Why can’t you just print some money and hand it out to everyone?”
“When asking this question, you probably meant that if you print the money and hand it out to all citizens, they will all become wealthier,” the bank said, adding that “such logic does not work for the economy as a whole.”
“Let’s imagine that the state will print some money and give each citizen 1,000 rubles ($10). However, at that moment, the number of goods in the economy will not increase. This means that the supply of goods will stay the same, while the ability to buy them will grow momentarily,” the bank added.
The result is obvious: the sellers will simply jack up the prices. We will be able to buy the same amount of goods but will need more money. In other words, mass handouts of money don’t make people weather and only drive up inflation.
The Russian economy has managed to adapt to sweeping sanctions imposed by Western countries in response to the Ukraine conflict.
Russian President Vladimir Putin said during his end-of-year press conference earlier this month that inflation poses “certain challenges” and remains the focus of the government. One of the pressing issues is the increase in food prices, especially for vegetables, eggs, and dairy products.
Russia’s inflation rate is hovering slightly above 9%, with GDP growing by 3.6% in 2024, Putin said.
In October, in order to curb inflation, the central bank raised the benchmark interest rate to a record 21%.
