Amidst a 16-month low for the rouble’s valuation, Russia has chosen to enact a substantial interest rate elevation, now resting at 12%.
The rouble breached the threshold of 100 per dollar on Monday, a development that led Russia’s central bank to convene an impromptu session to address the situation.
In a recent announcement, the Bank of Russia clarified that it had taken the decision to augment interest rates from 8.5% to counteract mounting inflation, which had reached 4.4% in the month of August.
Various factors have been piling pressure on the Russian economy, including an escalating import rate outpacing exports and amplified expenditure towards the ongoing conflict in Ukraine.
The Bank of Russia highlighted, “Persistent expansion in local demand exceeding production capacity reinforces the underlying inflationary stress and subsequently influences the ebb and flow of the rouble’s exchange rate due to heightened import demand.”
While acknowledging the emergence of “inflationary pressure,” the central bank emphasized its paramount objective of reducing inflation, denoting the rate of price ascent, to 4% by the year 2024.
Russia has found itself subjected to sanctions imposed by Western nations subsequent to its military intervention in Ukraine in February 2022.
The trajectory of the rouble took a nosedive during the onset of the conflict, but this was partially counterbalanced by the imposition of capital controls and the continual flow of revenue from oil and gas exports.
However, the rouble has sustained a cumulative depreciation of approximately 25% against the US dollar since the incursion into Ukraine. Presently, over 100 roubles are necessitated to procure a solitary dollar.
