For citation:
Sinichenko O. A. Monetary policy transmission issues: Why changing the key interest rate doesn’t always curb inflation?. Journal Izvestiya of Saratov University. Economics. Management. Law, 2026, vol. 26, iss. 1, pp. 16-25. DOI: 10.18500/1994-2540-2026-26-1-16-25, EDN: DXRZQX
Monetary policy transmission issues: Why changing the key interest rate doesn’t always curb inflation?
Introduction. The key rate is the main monetary policy instrument through which the central bank influences inflation. However, in practice, a situation is often observed when monetary policy tightening and a significant increase in the key rate do not lead to a rapid and adequate reduction in inflation. This fact indicates the presence of serious problems in the transmission mechanism, which requires an in-depth analysis of this phenomenon’s causes. Theoretical analysis. The article pays special attention to the theoretical foundations of the monetary policy transmission mechanism, the key channels for transmitting signals from the key rate to inflation (interest rate, credit, foreign exchange and others), as well as the factors that can disrupt their operation. In particular, structural features of the economy are considered in detail, such as a high share of monopolized markets, weak competition in the banking sector and low confidence of economic agents in the regulator’s policies, which distort the standard relationships. Empirical analysis. Statistical data on the dynamics of the key rate, inflation, credit and deposit rates, as well as macroeconomic indicators necessary for assessing the effectiveness of the transmission mechanism are analyzed. The calculations and correlation analysis revealed periods and conditions under which the key rate’s impact on inflation was weakened and identified key gaps in the transmission mechanism. Results. Key issues hindering the effective transmission of monetary policy in the current environment were identified. In addition to traditional time lags, the main causes were found to be structural imbalances in the economy, persistently high inflation, and the influence of non-monetary inflationary factors (sanctions, supply chain disruptions), which the key rate cannot directly influence. The analysis showed that, for the Bank of Russia’s measures to have a more effective impact on the economy, simply adjusting the key rate is not enough. Deep structural reforms in the economy must be carried out in parallel.
- Woodford M. Interest and prices: Foundations of a theory of monetary policy. Princeton University Press, 2003. 808 p. Available at: https://press.princeton.edu/books/hardcover/9780691010496/interest-and-p... (accessed October 27, 2025).
- Bernanke B. S., Gertler M. Inside the Black Box: The credit channel of monetary policy transmission. The Journal of Economic Perspectives, 1995, vol. 9, iss. 4, pp. 27–48. https://doi.org/10.1257/jep.9.4.27
- Belousov A. R. The Russian economy in the mediumterm perspective: Development scenarios. Studies on Russian Economic Development, 2004, vol. 15, no. 4, pp. 329–347. EDN: XCPTHC
- Golovnin M. Yu. Monetary policy in Russia: Reaction to new external challenges. Bulletin of the Institute of Economics of the Russian Academy of Sciences, 2023, no. 1, pp. 7–20 (in Russian). https://doi.org/10.52180/2073-6487_2023_1_7_20, EDN: BOEIAH
- Taylor J. B. Discretion versus policy rules in practice. Carnegie-Rochester Conference Series on Public Policy, 1993, no. 39, pp. 195–214.
- Yudaeva K. On the exchange rate policy. Voprosy Ekonomiki, 2010, no. 1, pp. 21–28 (in Russian). https://doi.org/10.32609/0042-8736-2010-1-21-28, EDN: KYJROZ
- Acemoglu D., Johnson S., Robinson J., Thaicharoen Y. Institutional causes, macroeconomic symptoms: Volatility, crises and growth. Journal of Monetary Economics, 2003, vol. 50, iss. 1, pp. 49–123.
- Sinichenko O. A. Adaptation of the banking sector to the conditions of instability of the global fi nancial environment. Economic and Social Problems of Russia, 2024, no. 1 (57), pp. 106–125 (in Russian). https://doi.org/10.31249/espr/2024.01.07, EDN: OKYVTN
- Blanchard O. J., Galí J. Labor markets and monetary policy: A New-Keynesian model with unemployment. American Economic Journal: Macroeconomics, 2008, vol. 2, no. 2, pp. 1–30. https://doi.org/10.1257/mac.2.2.1
- Gurvich E. T. Capabilities and limitations of growth of the Russian economy in period till 2024. Issues of Economic Theory, 2019, no. 1 (4), pp. 30–45 (in Russian). https://doi.org/10.24411/2587-7666-2019-00003
- Gurvich E. T. The intangible drivers of financial crises. Part 2. Contemporary World Economy, 2023, vol. 1, no. 2, pp. 6–27 (in Russian). https://doi.org/10.17323/2949-5776-2023-1-2-6-27, EDN: UGWTRH
- Tyukavkin N. M. Conceptual analysis of “The theory of rational expectations”. International Research Journal, 2015, no. 8–1 (39), pp. 90–93 (in Russian). EDN: UHNZYZ
- Moiseev S. Macroanalysis of exchange rate: From Kassel to Obstfeld and Rogoff. Voprosy Ekonomiki, 2004, no. 1, pp. 49–65 (in Russian). https://doi.org/10.32609/0042-8736-2004-1-49-65, EDN: PJJFZB
- Zimovets A. V., Sorokina Yu. V., Khanina A. V. A set of proposals to protect the Russian economy from Western sanctions at the macro-, meso- and micro-levels. Journal of International Economic Affairs, 2022, vol. 12, no. 2, pp. 195–214 (in Russian). https://doi.org/10.18334/eo.12.2.114792, EDN: KZLOCK
- Sinichenko O. A. The role of the banking sector in the development of the country’s economy. Bulletin of the Taganrog Institute of Management and Economics, 2023, no. 4 (40), pp. 3–10 (in Russian).