Russia hikes interest rates to 10% in a desperate bid to prop up the crumbling ruble
Russia carried out a big interest rate hike yesterday in a desperate attempt to prop up its crumbling currency.
Following criticism from the Kremlin over its handling of the economy, central bank governor Elvira Nabiullina called an emergency meeting with officials that ended with a rate hike from 8.5% to 12%.
The ruble, which plunged to its lowest level against the dollar in a year and a half on Monday, drawing a rebuke from President Vladimir Putin’s economic adviser, rebounded higher after the move.
Fighting inflation: Russia’s central bank governor Elvira Nabiullina (pictured) called an emergency meeting that ended with a rate hike from 8.5% to 12%.
But then he gave up his gains as fears for the Russian economy, battered by sanctions after the invasion of Ukraine, continued to take their toll.
This week, the Kremlin directly blamed the central bank for the weak currency, raising speculation that Nabiullina could be made a scapegoat.
The central bank raised rates in Russia to 20 percent after the invasion of Ukraine to support the ruble.
Rates were cut to 7.5 percent as the currency rallied on rising oil prices.
But with the ruble falling, rates rose again to 8.5 percent last month. It was not supposed to change interest rates again until next month, before the Kremlin intervened.
Stuart Cole, chief macroeconomist at Equiti Capital, said the ruble’s slide underscored “the costs of the invasion of Ukraine.”