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Ruble recovers after central bank rate hike

2023-08-15 11:21:00, Kosova & Bota CNA
Ruble recovers after central bank rate hike
Illustrative photo

The ruble has recovered after the central bank rate hike.

The Russian currency has been boosted by the central bank's measure.

Now it takes 97 rubles to buy one dollar, while yesterday the exchange rate was 102 rubles to one dollar.

The Bank of Russia has raised its base rate to 12% from 8.5%. She explained in a statement on her website:

The decision aims to limit risks to price stability.

Inflationary pressure is increasing. On August 7, the annual rate of inflation rose to 4.4%, while current rates of price growth continue to rise. Over the past three months, actual price growth averaged 7.6% in annual terms, on a seasonally adjusted basis. The same measure of core inflation went to 7.1%.

The sustained growth of domestic demand, exceeding the capacity to expand production, reinforces the underlying inflationary pressure and has an impact on the dynamics of the ruble exchange rate through increased demand for imports. As a result, the pass-through of ruble devaluation in prices is gaining momentum and inflationary expectations are increasing.

Going forward, with the current rates of price growth remaining at the achieved levels, the risk of inflation upward deviation from the target in 2024 is considerable. The Bank of Russia's decision aims to shape the monetary conditions and overall dynamics of domestic demand needed to return inflation to 4% in 2024 and stabilize it near 4% thereafter.

Going forward, in its decision-making on the base rate, the Bank of Russia will take into account the current and expected dynamics of inflation in relation to the objective and processes of economic transformation, as well as risks arising from internal and external conditions and reaction of financial markets. According to the forecast of the Bank of Russia, given the stance of monetary policy, annual inflation will return to 4% in 2024./ CNA





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