He Central Bank of Russia (BCR) increased this Tuesday by 3.5 points, up to 12%, the interest ratethe highest since May 2022, to curb the ruble depreciation and ensure price stability.
The BRC’s decision was adopted at an extraordinary meeting of its Board of Directors.
“Inflationary pressure continues to rise. By August 7, annual inflation increased to 4.4%. At the same time, the current rate of price growth continues to accelerate,” the BCR said in a statement.
He highlighted that, on average, during the last three months, seasonally adjusted price growth was 7.6% on an annualized basis.
The extraordinary rate meeting came after the ruble plunged above the 100 threshold against the dollar on Monday, dragged down by the impact of Western sanctions on Russia’s trade balance and increased military spending.
He President Vladimir Putin’s economic adviser Maxim Oreshkin rebuked the central bank on Monday blaming the ruble’s weakness on what he called soft monetary policy. Hours after Oreshkin’s words, as the ruble plunged towards 102 against the dollar, the bank announced the emergency meeting, throwing a lifeline into the currency.
According to the regulator, “the increase in domestic demandwhich exceeds the expansion capacity of production, reinforces the persistent inflationary pressure and influences the dynamics of the ruble exchange rate due to a greater demand for imports”.
When arguing its decision to raise the interest rate, the Central Bank indicated that if the current rate of price growth is maintained, there is a “significant risk” of inflation exceeding target raised for 2024, which is 4%.
Due to the political instabilityto the increased importsthe drop in exports and the Western sanctions on Russia Due to the war in Ukraine, the ruble has devalued more than 27% during the first seven months of this year.
The ruble has not stopped depreciating since the head of the Wagner Group, Yevgueni Prigozhin, led a failed armed rebellion on June 23-24.
This Monday the Russian currency was trading at just over 100 rubles per dollar.
The lowest point of the Russian currency was reached on March 10, 2022, two weeks after the start of the war in Ukraine, when it fell to 121.5 rubles per dollar.
This collapse has led the Bloomberg agency to consider the ruble as one of the three weakest currencies in the world due to its instability along with the Turkish lira and the Argentine peso.
(With information from EFE and Reuters)
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