Russian Interest Rate Increase
August 15, 2023
The Russian ruble is also in today’s spotlight. One day after such fell to a 17-month low and amid accusations from a high advisor to President Putin blaming a loose monetary policy for the currency’s eroded value, the Central Bank of Russia held an emergency board meeting today and agreed to hike the benchmark interest rate by 350 basis points to a 16-month high of 12.0%. In the early days of the war with Ukraine, the rate was jacked up in two moves by 1,150 basis points to 20.0% by end-February 2022. 900 basis points of that increase was reversed by May and a further 350 bps of reduction followed by September. The rate remained at 7.5% until a one percentage point high last month. A released statement justifies today’s rate hike as follows:
Steady growth in domestic demand surpassing the capacity to expand output amplifies the underlying inflationary pressure and has impact on the ruble’s exchange rate dynamics through elevated demand for imports. Consequently, the pass-through of the ruble’s depreciation to prices is gaining momentum and inflation expectations are on the rise.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Central Bank of Russia
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