Our AI writing assistant, WriteUp, can assist you in easily writing any text. Click here to experience its capabilities.

Russia’s central bank hikes rates to 12 percent to halt rouble’s slide

View Original View Raw

Summary

Russia's central bank has raised its key interest rate from 8.5 percent to 12 percent in an emergency move to try and halt the rouble's recent slide. This was in response to the rouble falling past the 100 threshold against the US dollar and the public call from the Kremlin for tighter monetary policy. This move was made to limit the price stability risks, with inflationary pressure building up and inflation expectations on the rise. The rate hike is likely to have an element of politics behind it, signaling the costs of the invasion of Ukraine to the Russian public, and the bank has removed its signal that it was ready to raise rates further. This is likely to be the peak of the rate hikes as the bank has little ammunition for FX intervention and will struggle to attract capital inflows due to sanctions.

Q&As

What measures did Russia's central bank take to try and halt the rouble's slide?
Russia's central bank took an emergency measure to hike its key interest rate by 350 basis points to 12 percent in an attempt to halt the rouble's slide.

Why did the Kremlin publicly call on the central bank to tighten its monetary policy?
The Kremlin publicly called on the central bank to tighten its monetary policy after the rouble plummeted past the 100 threshold against the US dollar.

What are the effects of Western sanctions on Russia's balance of trade?
The effects of Western sanctions on Russia's balance of trade have dragged down the rouble.

How has the central bank’s handling of the economy been viewed since Russia began its "special military operation" in Ukraine?
The central bank's handling of the economy has been viewed positively since Russia began its "special military operation" in Ukraine.

What other measures has the central bank taken to try and reduce the rouble's decline?
The central bank has tried to limit the rouble's decline by halting the finance ministry's FX purchases to try to reduce volatility, and by having some unfrozen renminbi assets and gold reserves.

AI Comments

👍 It is encouraging to see the Russian central bank taking steps to address the slide in the rouble by hiking rates to 12 percent. This shows the bank's commitment to maintaining price stability.

👎 The Kremlin's public criticism of the central bank's monetary policy adds further pressure to the already fragile economy. This could have a negative impact on the upcoming presidential election in 2024.

AI Discussion

Me: It's about Russia's central bank hiking interest rates to 12 percent to try and halt the rouble's slide after the public called on the central bank to tighten its monetary policy. It mentions the effects of Western sanctions, the military spending, and the Russian-Ukraine war.

Friend: Wow, that's quite a big move. What are the implications of this decision?

Me: Well, the decision will likely have had an element of politics behind it as well as economics. It's a signal to the Russian public about the costs of the invasion of Ukraine. The decision may help to limit inflationary pressure in the short term, but the rouble is still likely to struggle to attract capital inflows due to sanctions. This could also mean that the central bank has little ammunition for FX intervention, as they have limited reserves of gold and renminbi assets.

Action items

Research the current economic and political situation in Russia and Ukraine to gain a better understanding of the context of the article.
Follow the news for updates on the rouble’s performance and the central bank’s monetary policy decisions.
Analyze the potential implications of the central bank’s rate hike on the Russian economy and the global markets.

Technical terms

Key Interest Rate: The key interest rate is the rate at which the central bank lends money to commercial banks. It is used to control the money supply and inflation.
Basis Points: Basis points are a unit of measure used in finance to describe the percentage change in the value or rate of a financial instrument. One basis point is equal to 0.01%.
Pass-Through: Pass-through is a term used to describe the transmission of changes in the cost of inputs to the prices of goods and services.
Inflationary Pressure: Inflationary pressure is an increase in the general level of prices of goods and services in an economy over a period of time.
Inflation Expectations: Inflation expectations are the expected rate of inflation over a certain period of time.
Price Stability: Price stability is a situation in which the prices of goods and services remain relatively stable over time.
FX Purchases: FX purchases are the buying of foreign currency with the intention of holding it as an investment.
Capital Inflows: Capital inflows are the movement of money into a country for investment purposes.
FX Intervention: FX intervention is the use of a country's foreign exchange reserves to influence the exchange rate of its currency.