The Board of Directors of the Bank of Russia decided to increase the key rate by 200 basis points - to 15%

The decision to immediately increase the key rate by 2%, to 15%, becomes not an economic, but a political action. The consequences of raising the rate could be devastating for the Russian economy:

▪️already on the eve of the rate increase, banks almost completely stopped lending, including to government agencies;

▪️ compression of the lending market due to tightening conditions will not only reduce the volume of issuances, but will actually create barrier conditions for all enterprises and individuals who do not apply for preferential products;

▪️for enterprises this threatens to reduce opportunities to expand activities and stop investment programs;

▪️the money will go to the defense industry, which does not produce consumer goods and does not export manufactured products.

Accordingly, money is withdrawn from everywhere and thrown into this black hole, which further depresses production. At the same time, military salaries are greatly increased, and considerable payments are made for the wounded and dead (about 1 million wounded and 300 thousand killed ). And this is also money that does not produce anything, it is not tied to the production of any products.

As a result, Russians should expect a shortage of products in all consumer sectors and a jump in prices. There is more money in the hands of the population due to “helicopter payments”. It is logical that imbalances, deficits, and unsecured monetary demand arise everywhere. All this destroys the economy.

Raising the rate is an attempt to dampen negative processes.
But a legitimate question arises: what then? The original problems remain, and the Central Bank cannot influence them at all.