Image: YURI KADOBNOV (AFP)
There should be a press release on Tuesday at 9:30 a.m. (CEST), as the central bank announced on Monday. The next regular meeting would not have been until September 15th. Apparently, the recent fall in the ruble has now put the central bank under pressure, which had already signaled a rate hike for the regular meeting.
The national currency had meanwhile fallen to 101.75 rubles against the dollar and was thus weaker than it had been in almost 17 months. The announcement of the central bank’s crisis meeting gave the currency stability again: the ruble strengthened again at 98.60 against the US currency.
Maxim Oreshkin, President Vladimir Putin’s economic adviser, stressed in a comment that the Kremlin wants to see a strong ruble and expects it to return to normal soon. This was taken as a sign that the central bank should take action ahead of its next scheduled interest rate meeting in mid-September. “The main reason for the weakening of the ruble and the acceleration of inflation is loose monetary policy,” Oreshkin wrote.
The monetary authorities in Moscow had raised the key interest rate in July for the first time since the beginning of the invasion of Ukraine – and surprisingly sharply by a full point to 8.5 percent. At 4.3 percent in July, the inflation rate exceeded the 4.0 percent target set by the central bank. The central bank expects it to end up at 5.0 to 6.5 percent this year and not return to the stability goal until 2024.
The weakness of the ruble goes hand in hand with the increasing risk of inflation, against which the central bank is fighting by selling foreign currency holdings. With a flexible interest rate reaction, the monetary authorities have made a significant contribution to cushioning the economic effects of the Ukraine conflict and the Western sanctions against Russia.
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