THE ROLE OF THE CENTRAL BANK KEY RATE IN REGULATING INFLATIONARY PROCESSES IN MODERN RUSSIA

Abstract

The article examines the role of the Bank of Russia's key rate as the primary instrument of monetary policy in regulating inflationary processes. The relevance of the topic is determined by the contradictory situation of 2023-2024, when an aggressive rate hike failed to slow price growth, thereby challenging the effectiveness of conventional monetary approaches under the dominance of structural and non-monetary inflation factors. The purpose of the study is to identify the nature of the relationship between the key rate dynamics and the inflation rate in Russia, as well as to assess the actual capabilities and limitations of the monetary policy transmission mechanism, drawing on a synthesis of macroeconomic theory, statistical data analysis, and a review of academic publications. The methodological framework of the study integrates systemic, political economy, institutional, and monetary approaches, which enabled the consideration of monetary policy as an internally contradictory mechanism of interaction among the regulator, the banking system, businesses, and households. The study employs the dialectical method, methods of deduction and induction, correlation analysis, time series analysis, comparative analysis, the grouping method, and the tabular method. The findings indicate that the relationship between the key rate and inflation in the Russian context is complex and nonlinear, and that the transmission mechanism operates with considerable time lags. It has been revealed that a prolonged tight monetary policy, while curbing demand-pull inflation, simultaneously induces an increase in producer costs and suppresses investment activity, particularly in the small and medium-sized enterprise sector. The main conclusion is that the key rate remains an effective yet not all-encompassing instrument, the effectiveness of which declines critically in an economy dominated by non-monetary sources of inflation.