The Russian Rouble soared to a six-week peak against the US Dollar on Friday, propelled by the Bank of Russia’s decision to raise interest rates to 15% significantly; however, it experienced a slight retraction later on. Contributing to the Rouble’s performance were augmented foreign currency sales by exporters.
The central bank implemented a 200-basis-point surge in its key interest rate, surpassing the anticipated 100-point increase. This strategy marked the fourth consecutive meeting where borrowing costs underwent a hike. The aggressive stance responded to various economic pressures, including the Rouble’s depreciation, persistent inflationary tensions, and escalated budgetary expenditures.
By the time the clocks struck 1417 GMT, the Rouble had fortified by 0.4%, pushing its standing against the dollar to 93.57. It had momentarily touched 92.5100, a zenith unseen since September 12. The currency also saw gains against the euro and the yuan, with respective rises of 0.5% and 0.3%.
Sovcombank’s chief analyst, Mikhail Vasilyev, projected a temperately positive aftermath for the Rouble in the ensuing days, post-decision. This prediction hinges on the expectation of diminished consumer and investment thrust, a downturn in import demand, and a renewed allure for Rouble savings. Vasilyev anticipates the Rouble oscillating between specific ranges against the dollar, euro, and yuan as the year concludes.
Persistent Inflation Concerns
Despite a slight dip in household inflation expectations in October, settling at 11.2%, the figures did not significantly sway the central bank’s resolutions. These statistics stubbornly hover above the 4% target, eliciting comments from CentroCreditBank economist Yevgeny Suvorov regarding the enduring high inflation expectations. This scenario even sparks speculations about a potential elevation of rates to 16% in the upcoming December 15 meeting.
Recent days saw the Rouble drawing support from month-end tax commitments, a period typically witnessing exporters exchanging foreign earnings to cover domestic obligations. Compounding this were new regulations enforced by President Vladimir Putin, necessitating extensive foreign exchange sales by key exporters.
These measures, having pushed the Rouble from beyond the 100 mark against the dollar, were met with scepticism by Bank of Russia Governor Elvira Nabiullina. She minimized the expected impact of these currency restrictions on long-term exchange rate dynamics.
Parallel to these internal manoeuvres, Brent crude oil, a bellwether for Russia’s principal export, noted a 0.8% increment, reaching $88.61 per barrel. In contrast, Russian stock indexes recorded a downtrend, with marginal declines in both the dollar-denominated RTS index and the rouble-based MOEX Russian index.
