MOSCOW (Reuters) – Russia’s central bank raised its key rate by 350 basis points to 12% on Tuesday after an extraordinary meeting, an emergency measure to try to stop the depreciation of the ruble, the Kremlin having called on Monday for a greater monetary tightening.
The extraordinary meeting took place after the Russian currency broke through the 100 rubles per dollar threshold, under pressure from Western sanctions that are weakening Russia’s trade balance and rising military spending.
President Vladimir Putin’s economic adviser Maxim Oreshkin on Monday blamed the central bank’s accommodative monetary policy for the weakening Russian currency.
A few hours after these remarks, while the currency plunged towards 102 rubles per dollar, the bank announced the holding of an emergency meeting.
“Inflationary pressure is building,” the bank said in a statement Tuesday. “The decision aims to limit risks to price stability.
“The impact of ruble depreciation on prices is growing and inflation expectations are on the rise.”
The bank carried out one last emergency rate hike at the end of February 2022, raising the key rate to 20%, before lowering it steadily until it reached 7.5% while strong inflationary pressure eased in the second half of 2022.
Since its last rate cut in September 2022, the bank has steadily toughened its rhetoric, eventually raising its rate by 100 basis points to 8.5% at its last meeting in July.
The next monetary policy decision is scheduled for September 15.
(Reuters reporting, writing by Alexander Marrow; Corentin Chapron, editing by Kate Entringer)
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