Russian Ruble Tumbles, Central Bank Hikes Key Interest Rate in Response

The ruble hit a 17-month low last weekend before the Central Bank of Russia hiked its key interest rate to 12% in an emergency meeting to halt the currency’s collapse and cool inflation domestically.

The Details: At this week’s low point, the ruble traded at 101.75 to 1 USD. As of Saturday morning, the currency has gained some ground back, trading at 94 to 1 USD. While the devaluation of the ruble hurts working-class people the most, other benchmarks of the Russian economy like Brent Crude Oil and certain stock indices do not indicate an economic crisis at large.

For Context: Minus drastic changes in early to mid-2022, over the past 5 years, the ruble to USD rate hovered mostly between 60 and 75. Increasing Western sanctions have hampered Russia’s ability to attract outside capital, however, Russia has found ways to circumvent some through intermediary nations.

Key Quotes: Chris Weafer, CEO of Macro Advisory Partners, said the ruble’s “weakness was planned” to “compensate for the drop in the dollar value of oil receipts,” and that “The lower ruble is partly a reflection of the effect of sanctions, but it doesn’t indicate an underlying economic crisis.” Ulrich Leuchtmann, head of currency strategy at the German Commerzbank AG, said, “The rate hike will hardly convince those who might have a choice to keep their capital inside Russia.”

How The Media Covered It: Western media sources expressed similar sentiments; the ruble’s devaluation does not indicate economic collapse, but is not ideal for the Kremlin either.