MOSCOW: Russia’s central bank hiked its key interest rate by 350 basis points to 12 per cent 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 0.5pc weaker at 98.16 by 1056 GMT, but still significantly above lows near 102 on Monday which had not been hit since the early weeks after Russia invaded Ukraine.Russia’s widening budget deficit and stark labour shortage have contributed to rising inflationary pressure this year, but the rouble’s rapid slide from around 70 against the dollar at the start of the year to more than 100 on Monday pushed the central bank to act.
The bank, which blames the rouble’s slide on Russia’s shrinking current account surplus - down 85pc year-on-year in January-July - has already tried to limit the rouble’s decline.
Oil slips 2pc
Oil prices fell about 2pc on Tuesday on sluggish Chinese economic data coupled with fears that Beijing’s unexpected cut in key policy rates was not sufficiently substantial to rejuvenate the country’s sputtering post-pandemic recovery.
Brent crude futures fell $1.60, or 1.9pc, to $84.61 a barrel by 1733 GMT, while US West Texas Intermediate crude fell $1.83, or 2.2pc to $80.68.
Published in Dawn, August 16th, 2023
