Russia's central bank has taken a decisive step in response to the ruble's recent decline against the dollar. On Tuesday, the bank announced a significant increase in its key interest rate, elevating it from 8.5 percent to 12 percent. This move follows an extraordinary meeting convened earlier in the day.
The central bank's primary objective is to curb potential risks to price stability arising from the ruble's depreciation. Inflationary pressures are on the rise, and the bank expressed concerns about meeting its 2024 inflation target if current price trends persist.
The bank outlined its plan for future rate decisions, emphasizing a data-driven approach. It will closely monitor actual and projected inflation dynamics to ensure alignment with its inflation targets.
The next assessment of the key rate is scheduled for September 15th, demonstrating the bank's commitment to addressing the evolving economic situation.
The ruble's value against the dollar has declined by approximately 30 percent since the beginning of the year. This slide can be attributed to multiple factors, including reduced export revenues, increased imports, and heightened military spending.
Despite the bank's efforts to tighten monetary policy, inflation remains a concern. Consumer prices saw a year-on-year increase of 4.3 percent in July.
Data from the Moscow Exchange revealed the ruble's vulnerability, as it weakened against the dollar following the rate hike. At 10:48 local time (0748 GMT), the exchange rate reached 96.83.
In a separate development, the ruble surpassed 100 against the dollar, prompting a Kremlin aide to criticize the prevailing loose monetary policy through a public op-ed published in state media.
The ongoing decline in the ruble and the persistent inflationary pressures are stoking fears about the potential impact on the standard of living for ordinary citizens.
