Russian Central Bank hikes interest rates by 350 bps to curb ‎ruble’s decline

Russian Central Bank raised interest rates by 350 basis points to 12% today, in an emergency move aimed at trying to stem the decline in the ruble exchange rate against the dollar, after a public call by the Kremlin to tighten monetary policy.

According to Reuters, the convening of the extraordinary meeting of the Central Bank on interest came after the dollar crossed the threshold of 100 rubles yesterday, due to the impact of Western sanctions on Russia’s trade balance and with the increase in military spending.

Maxim Oreshkin, economic advisor to President Vladimir Putin, criticized the central bank, and attributed the ruble’s decline to what he described as the bank’s policy of monetary easing.

Hours after Oreshkin’s speech, the ruble fell to 102 against the dollar, and the central bank announced the emergency meeting.

“Inflationary pressures are escalating, and the decision aims to reduce risks to price stability,” the bank said in a statement today

“The impact of the ruble’s decline on prices is getting stronger, and inflation expectations are rising,” he added

The last time the Central Bank raised interest rates exceptionally was in February 2022 when it raised it to 20%, then the bank steadily reduced the cost of borrowing to 7.5% with the decline of inflation pressures in the second half of 2022.