Russian central bank jacks up rates to 12% to support battered rouble

Russia’s central bank hiked its key interest rate by 350 basis points to 12% on Tuesday, an emergency move to try and halt the rouble’s recent slide after a public call from the Kremlin for tighter monetary policy.

The extraordinary rate meeting came after the rouble plummeted past the 100 threshold against the dollar on Monday, dragged down by the impact of Western sanctions on Russia’s balance of trade and as military spending soars.

The rouble pared gains after the decision to stand 0.3% weaker at 98.00 by 0837 GMT, but still significantly above lows near 102 on Monday which had not been hit since the early weeks after Russia invaded Ukraine.

President Vladimir Putin’s economic adviser Maxim Oreshkin on Monday rebuked the central bank, blaming what he called its soft monetary policy for weakening the rouble.

Hours after Oreshkin’s words, the bank announced the emergency meeting, throwing the currency a lifeline.

“Inflationary pressure is building up,” the bank said in a statement on Tuesday. “The decision is aimed at limiting price stability risks.

“The pass-through of the rouble’s depreciation to prices is gaining momentum and inflation expectations are on the rise.”

Central Bank Governor Elvira Nabiullina has won plaudits for her handling of the economy since Russia began what it calls a “special military operation” in Ukraine, but the plunging rouble and high inflation have put her on the back foot, especially among pro-war nationalists.

This report’s information was first seen on REUTERS; to read more, click this link.