Monetary Policy of the Bank of Russia: Areas for Improvement Based on the Experience of Other Countries

Abstract

Subject. The need to adapt monetary policy to changing conditions forces monetary authorities in different countries both to adjust the instruments they use and to resort to new regulatory mechanisms.
Purpose. To analyze the effectiveness of the monetary policy of the Bank of Russia under the inflation targeting regime, to assess the effectiveness of anti-inflationary monetary policy in foreign countries, and to formulate proposals for improving Russia's monetary policy based on the experience of other countries.
Methodology. We used vector autoregression and impulse response functions of inflation to changes in the key rate and the required reserve ratio in Russia, Turkey, and the United States. We covered the period from January 2019 to August 2025.
Results. We find that the United States demonstrates the most effective anti-inflationary policy. Inflation declines in response to a change in the Fed's rate as early as the first month. In Russia, inflation reacts to an increase in the key rate with a sharp rise after one month, which we attribute to high inflation expectations among the population. In the second month, this effect weakens. We also observe significant differences in monetary policy and the use of its instruments between Russia and the United States.
Conclusions. To reduce inflation most effectively without negative consequences for the Russian economy, we consider it most promising to use instruments not directly linked to the key rate. Specifically, we recommend improving the Bank of Russia's communication policy, creating incentives for the Bank of Russia to purchase government securities, deepening cooperation between fiscal, monetary, and macroprudential authorities, and developing the quantitative easing mechanism.