Faced with a significant decline in the ruble and a resurgence of inflation, the Russian Central Bank has taken bold measures by raising its key interest rate from 8.5% to 12%. This decision aims to stabilize the economy and mitigate risks to price stability.
The Russian Central Bank (RCB) has recently made an unexpected move in monetary policy by increasing its key interest rate from 8.5% to 12%. This decision comes as the ruble, Russia’s national currency, has experienced a steady decline for over a year, with a nearly 25% drop against the US dollar since the beginning of the year. Additionally, inflation has shown signs of resurgence, adding pressure on the country’s economy.
In an official statement, the RCB explained that this rate hike was necessary to control the rising inflation and to prevent any potential risk to price stability. This decision was made during an emergency meeting that considered the recent developments in the Russian economy as well as the reaction of international financial markets.
The RCB’s announcement had an immediate impact on the foreign exchange market. The ruble, which had reached its lowest level against the euro and the dollar since March 2022, experienced a brief period of volatility at the start of the European session, rising nearly 18% against the dollar before stabilizing around a 2.5% increase. This reaction highlights the immediate effect of the RCB’s decisions on financial markets.
Although the RCB’s measure led to a slight recovery of the ruble, experts remain cautious about the future of the Russian currency. Sylvain Bersinger, an analyst at Asterès, emphasizes that despite this short-term reaction, the ruble has experienced a consistent downward trend over the past year. The economic challenges facing Russia require ongoing monitoring and potential adjustments to monetary policy. The RCB has also hinted that it could make further decisions in the coming weeks, depending on the evolution of actual inflation and the reaction of financial markets.
