The Central Bank of Russia decided to sharply raise interest rates. The main rate has increased by 350 basis points and now stands at 12%. This desperate move by the Russian regulator is aimed at saving the ruble from further decline.
An emergency interest rate meeting was called after the ruble climbed above 100 against the dollar on Monday as Western sanctions affected Russia’s trade balance and boosted military spending.
The sharp fall of the ruble
Maxim Oreshkin, economic adviser to President Vladimir Putin, chided the central bank on Monday, blaming the weakening ruble on Russia’s loose monetary policy.
A few hours after Oreshkin’s words, when the ruble fell to 102 per dollar, the bank announced an emergency meeting, abandoning the currency as a last resort.
Russian inflation
“Inflationary pressures are mounting,” the bank said in a statement on Tuesday. “The decision is aimed at limiting the risks of price stability. The pass-through of the depreciation of the ruble to prices is gaining momentum, inflationary expectations are growing. After this decision, the ruble regained part of its daily gain, rising by 0.9%. to 96.79 from 07:48 Moscow time.
The last time the bank urgently raised the interest rate was at the end of February 2022, raising the interest rate to 20 percent. The bank then gradually reduced the cost of the loan to 7.5% as strong inflationary pressure eased in the second half of 2022.
After the last cut in September 2022, the bank kept interest rates unchanged but gradually stepped up its hawkish rhetoric, eventually raising the interest rate by 100 basis points to 8.5%. at the last scheduled meeting in July. The next rate decision is to be made on September 15th.
Russia recorded double-digit inflation in 2022, and after slowing down in the spring of 2023 due to the high base effect, annual inflation again exceeded the CBR’s target of 4%. and is accelerating.
Source: Wprost
I am George Brown, author at Daily News Hack. I mostly cover economy news and I have been doing this for quite some time now. I have a lot of experience in this field and I’m always looking for new opportunities to learn more.
