The Russian Central Bank has raised the key interest rate in an emergency meeting today to curb the significant sell-off of the ruble.
The decline of the ruble has raised concerns about Russia’s escalating costs in the ongoing Russia-Ukraine conflict.
On Tuesday, the Russian Central Bank increased the rate from 8.5% to 12%. The day before, the ruble had briefly fallen below 100 against the US dollar, marking the first time since March of last year.
In early trading on Tuesday, the ruble recovered to 96 against the US dollar. However, it has still plummeted more than 20% since the beginning of the year, making it one of the worst-performing currencies globally.
The recent decline of the ruble underscores increasing uncertainty in the Russian economy, which is linked to rising inflation, growing impact of sanctions, and severe labor shortages.
Former Russian Central Bank official Alexandra Prokopenko stated that the ruble depreciation reflects a fundamental imbalance in the Russian economy due to the Russia-Ukraine conflict.
Fundamentally, adjusting the interest rate by the central bank might not be able to alter the trend.
