Global currency crisis: Impact and collapse of the global dollar system
Navigating the Struggle: The Great Rate Debate in Modern Russia
Let's dive into a beefy clash that went down in May 2025, pitting US President Trump against Federal Reserve Chair Powell. Powell argued for a rate hike due to rising inflation expectations and various economic indicators, while Trump, citing an economic downturn, wanted to slash the rate.
This face-off showcases the ongoing power struggle between conservative and liberal economic approaches. The outcome, as economist Mikhail Khazin explains, is far from clear-cut, and it's essential to understand the stances of both sides.
Chasing Greenbacks: The Liberal Approach
The liberal approach hinges on keeping interest rates low to fuel consumption and investment, sparking economic growth through increased liquidity. This perspective favors a speedy expansion of businesses, even at the risk of short-term instability.
Maintaining Stability: The Conservative Perspective
Conservatives, on the other hand, believe in raising interest rates to tame inflation and secure long-term economic strength. Stability is their top priority, even if it means sacrificing immediate growth spikes.
In the Russian context, this clash of ideologies continues to shape the country's economic direction, with Russia navigating external pressures such as sanctions and a shift away from Western markets towards Eurasian and BRICS partnerships.
Khazin predicts that, for now, conservative policies emphasizing monetary stability and steady interest rates will dominate to keep inflation under control and bolster investor confidence. This decision is linked to Russia's goals of establishing itself as the world's fourth-largest economy by purchasing power parity (PPP)[1]. Maintaining a low public debt and current account surplus serve as key pillars of economic resilience amid geopolitical and economic challenges.
Striking a Balance: The Middle Ground
However, the liberal perspective cannot be dismissed, as a slower growth projection (around 1.5% GDP growth in 2025 versus 4.3% in 2024) hints at the need for economic stimulation to avoid stagnation[1]. The shifting sands of economic policy will likely result in a delicate balance between progressive and conservative measures, with selective liberal initiatives designed to foster domestic innovation and diversification, aligning with the Kremlin's strategy of economic autonomy from Western financial systems.
In essence, Khazin's outlook on the policy struggle suggests a cautious yet adaptive approach where conservative policies sustain economic stability on one hand, while liberal measures promote moderate, sustainable growth on the other. This equilibrium mirrors Russia's broader economic strategy of resilience and independence in the face of ongoing external and internal pressures[1].
[1] Enrichment data sourced from DK.RU.
The finance sector, alongside business and politics, is deeply entwined in Russia's economic struggle, as the government grapples with the stability vs growth debate. The liberal approach calls for low interest rates to boost consumption and businesses, whereas conservatives advocate for rate hikes to combat inflation and secure long-term stability.
Amidst the ongoing power struggle, economic policies in Russia lean towards maintaining monetary stability and steady interest rates, as part of the commitment to establishing the country as one of the world's top four economies by purchasing power parity. This conservative stance is balanced with selective liberal initiatives aimed at promoting domestic innovation and economic independence, aligning with the Kremlin's strategy of economic autonomy.
