Russia Raises Interest Rate to 12% Amid 17-Month Ruble Low

Facts

• Russia's central bank on Tuesday hiked interest rates from 8.5% to 12% in an emergency move aimed at stemming rising inflation and strengthening the ruble, which on Monday slid to its lowest point since the early weeks of the Ukraine war.¹
• After Russia launched its invasion in February 2022, a raft of sanctions caused its currency to plummet to as low as 136 rubles to the dollar. But by June, as oil and gas prices surged, it rocketed to 50 rubles to the dollar, making it one of the best-performing currencies in the world.²
• However by January of this year, as European countries weaned themselves off Russian oil and gas — a major source of income for the Kremlin — the ruble slid to roughly 66 to the dollar. It has since continued to slump and on Monday it slid past 101 rubles to the dollar — wiping off more than a quarter of its value since the beginning of the year.³
• After Tuesday's central bank announcement, the tide subsided and the currency returned to roughly 98 rubles to the dollar.¹

Sources: ¹Associated Press, ²CNN, and ³Al Jazeera.

Narratives

• Pro-Russia narrative, as provided by TASS. The weakened ruble has been caused by monetary policy that's allowed Russian borrowing to go up and up, thus increasing the money supply and driving up inflation. Nonetheless, Russia's central bank has all the necessary tools at its disposal to tackle this problem and the trend will soon be reversed.
• Anti-Russia narrative, as provided by CNN. The slump in Russia's currency is a consequence of the Western sanctions that have squeezed Russia's economy, largely in the form of decreased income from exports of Russian oil and gas. The Kremlin is also spending more and more on its war effort, therefore its public finances are taking a toll.

Predictions