Read why Russia’s interest rates are increased to 12%
Russia’s interest rates increases to 12% after the rouble dropped to its lowest value in 16 months.
The currency slipped past 100 per dollar on Monday, driving Russia’s central bank to have an emergency meeting.
The Bank of Russia said it decided to increase Russia’s interest rates from 8.5% to impede inflation, which hit 4.4% in August. Pressure has been climbing on the Russian economy due to imports increasing faster than exports and military spending growing for the Ukraine battle.
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“Steady growth in domestic demand surpassing the capacity to expand output amplifies the underlying inflationary pressure and has an impact on the rouble’s exchange rate dynamics through elevated demand for imports,” the Bank of Russia stated.
The bank stated “inflationary pressure” was building, but its target was to get inflation, which is the rate of price hike, down to 4% by 2024. Western nations have targeted Russia with boycotts following its attack on Ukraine in February 2022.
The rouble plunged after war broke out but was strengthened by capital controls and oil and gas exports. Yet, it has lost around a quarter of its value overall against the US dollar since Ukraine was attacked, and this week, around 100 roubles were needed to buy one dollar.
