Russia Sharply Hikes Interest Rates In Response To Slumping Ruble
ForbesAug 07, 2023
The Facts
Russia's central bank on Tuesday hiked interest rates from 8.5% to 12% in an emergency move aimed at stemming rising inflation and strengthening the ruble, which on Monday slid to its lowest point since the early weeks of the Ukraine war.
After Russia launched its invasion in February 2022, a raft of sanctions caused its currency to plummet to as low as 136 rubles to the dollar. But by June, as oil and gas prices surged, it rocketed to 50 rubles to the dollar, making it one of the best-performing currencies in the world.
The Spin
Pro-Russia narrative
The weakened ruble has been caused by monetary policy that's allowed Russian borrowing to go up and up, thus increasing the money supply and driving up inflation. Nonetheless, Russia's central bank has all the necessary tools at its disposal to tackle this problem and the trend will soon be reversed.
Anti-Russia narrative
The slump in Russia's currency is a consequence of the Western sanctions that have squeezed Russia's economy, largely in the form of decreased income from exports of Russian oil and gas. The Kremlin is also spending more and more on its war effort, therefore its public finances are taking a toll.
