The business ombudsman warned of the negative consequences of the increase in the Central Bank rate

An increase by the Bank of Russia of the key rate to 12% can be compared with a “double dose of antibiotics”, which will have negative consequences, business ombudsman Boris Titov believes.

“The Central Bank raised the key rate more than expected. Now 12%. Trying to suppress the disease, the doctor hurriedly injected a double dose of antibiotic, but any antibiotic has side effects, ”the press service quoted the commissioner as saying.

In particular, the increase in the rate temporarily puts an end to the development of the debt market and the emergence of new sources of financing for investment projects, Titov believes. In addition, although the new rate will benefit the ruble, “inflation will be fueled from the other side.” A striking example of this, according to the Ombudsman, is the rise in the cost of mortgages with large volumes of unsold remnants of housing from developers.

“In general, as I have said more than once, we respond to momentary problems, albeit very sensitive ones. But we are not laying the foundation for the future, we are not creating the ground for a truly self-sufficient economy,” Titov summed up.

Earlier, on August 15, the Board of Directors of the Bank of Russia, following an extraordinary meeting, raised the key rate by 3.5 percentage points to 12% per annum. The last time the Central Bank raised the rate less than a month ago – by 1 percentage point at a meeting on July 25. Since September 2022, it has been at the level of 7.5% per annum. Analysts polled by Vedomosti expected a rate increase of 1-6.5 percentage points to 9.5-15%, attributing this to the depreciation of the national currency.

The regulator himself explained the rate increase as an attempt to limit the risks to price stability. The impact on the rate, according to the Central Bank, has an increase in domestic demand, exceeding the possibility of expanding output, increasing sustainable inflationary pressure. Later today, the Central Bank issued an additional comment in which admitted further increase in the key rate if pro-inflationary risks increase.