Stepping up the campaign against inflation, Russia’s banking regulators have nearly doubled the amount of compulsory reserves that the country’s commercial banks have to lodge at the central bank. That is intended to limit the amount of money in circulation and so lower the rate of inflation.
Many Russian commercial banks are borrowing from foreign financial institutions or from the central bank itself and then lending that money on to customers. Up until now all high street banks have been required to keep 2% of whatever they had borrowed in reserve at the central bank. From the start of October that will be increased to 3.5%. Inflation is high in Russia because the country is awash with cash from the sale of high-priced oil. By July, the annual inflation rate was 6.9% and the government’s target for the whole year is 9%.