Business group warns high rates risk ‘autumn bankruptcies’
The quarter-point reduction to 14% extends the Bank of Russia’s easing cycle at a slower cadence, as policymakers weigh complaints from the business community about the burden of high borrowing costs against persistent inflationary pressure from wartime government spending. The bank had been cutting rates by at least half a percentage point per meeting until its quarter-point move on June 19, the first step down from the 21% peak reached last year.
The slowing pace reflects a compromise between Russia’s business lobby, which says high rates are squeezing investment and operating budgets, and the central bank’s stated goal of reducing annual inflation to 4%. Higher interest rates help combat rising prices but make it more expensive for businesses to borrow.
On Wednesday, Alexander Shokhin, head of the Russian Union of Industrialists and Entrepreneurs, said that maintaining the current rate level could produce a wave of “autumn bankruptcies.” His warning underscores the tension the central bank faces between supporting a stagnating wartime economy and restoring price stability.