The leadership of Russia’s Central Bank is currently divided over the factors underpinning the ruble‘s resilience. A significant portion of the board of directors attributes this robustness to the high interest rate, while some members emphasize the expectations stemming from negotiations with the United States as a more pivotal factor.
This divergence of opinion raises the question: which of these factors truly wields more influence over the ruble at present? Analysts consulted by RBC point out that, on one hand, despite the withdrawal of foreign funds that once provided currency inflows, the interest rate still exerts a substantial impact on the exchange rate. The tight monetary policy has played a role in maintaining this influence. However, on the other hand, any potential rate cuts are unlikely to occur rapidly enough to exert significant downward pressure on the ruble.
In the short term, geopolitical factors have taken center stage. Notably, the negotiations in Istanbul hold the potential to sway investor sentiment, influence the Central Bank’s decisions, and impact capital flows, all of which can, in turn, affect the exchange rate. The outcome of these negotiations could push the exchange rate in either direction, adding an element of uncertainty to the ruble’s future trajectory.
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