Russian central bank jacks up rates to 12%
Russia's central bank hiked its key interest rate by 350 basis points to 12% on Tuesday (August 15), an emergency move to try and halt the rouble's recent slide after a public call from the Kremlin for tighter monetary policy. - REUTERS
Transcript
00:00 Russia's central bank took action to support the struggling ruble on Tuesday.
00:06 It hiked its key interest rate by 350 basis points to 12%.
00:12 The move comes after the ruble fell past the 100 threshold against the dollar on Monday.
00:18 On the same day, President Vladimir Putin's economic adviser Maxim Oreshkin criticised
00:23 the central bank.
00:25 He blamed what he called its soft monetary policy for weakening the ruble.
00:29 Hours after Oreshkin's public criticism, the bank announced the emergency meeting.
00:34 Analysts largely agreed the move would not have a long-lasting impact, particularly as
00:39 the war in Ukraine drags on.
00:41 The Russian economy has been hit by Western sanctions and soaring military spending.
00:47 Yevgeny Nadorshin is chief economist at PF Capital.
00:52 The problem is that the instrument which the central bank has chosen is not the most efficient
01:00 in the short term as I see it right now.
01:04 But yes, it looks like it was enough in order to set a barrier around three-digit exchange
01:11 rates so the market no longer tries to attack it.
01:16 And yesterday they passed, the dollar passed below, it slipped below that on the news that
01:22 the central bank intends to intervene.
01:25 But we don't see much of a success.
01:27 In the morning there were movements towards like 95, 93 rubles per dollar, but they sent
01:34 it up pretty quickly.
01:37 The central bank last made an emergency rate hike in February last year with a raise to
01:41 20%.
01:42 It then steadily lowered the cost of borrowing to 7.5% as strong inflation pressure eased.
01:50 Since its last cut in September, the bank had held rates before an eventual 100 basis
01:55 point hike to 8.5% at its last scheduled meeting in July.
02:00 The next rate decision is due on September 15th.
02:03 Annual inflation is now above the central bank's 4% target and speeding up.
02:08 Russia's widening budget deficit and a labour shortage have contributed to rising inflationary
02:14 pressure this year.
02:15 But the ruble's quick slide from around 70 against the dollar at the start of the year
02:19 to more than 100 on Monday pushed the central bank to act.
02:24 The bank blames the ruble's slide on Russia's shrinking current account surplus, which is
02:29 down 85% year on year in January to July.
02:32 [BLANK_AUDIO]