Ruble Reacts as Russia Keeps Key Rate at 16%
Russia’s central bank (CBR) Friday said its Board of Directors decided to keep the key rate at 16.00%, as expected. The rate hold follows a slowdown in consumer inflation in the country, and the ruble reacted negatively against the US dollar.
Inflationary pressures have eased from the previous months but remain high, said the central bank in its policy statement. Domestic demand is still outstripping the capabilities to expand the production of goods and services.
A judgment on the sustainable nature of emerging disinflationary trends would be “premature,” added CBR, pointing out its monetary policy is set to solidify disinflation processes unfolding in the national economy.
According to the CBR’s forecast, Russian annual inflation will decline to 4.0%-4.5% this year and will stabilize close to 4% further on.
The Russian ruble depreciated past 92.6 per USD in February, testing levels last seen in early November, after the Central Bank of Russia held its key policy rate unchanged at 16%, as expected. T-Bills Market Bullish Ahead of Feb Rate Hike Expectation
The decision marked a pause to the central bank’s tightening cycle following 850bps in rate hikes since July of 2023, as policymakers noted that upside risks to inflation have slightly waned since stark levels of late 2023.
Additionally, the ruble was also pressured by pessimistic growth projections and a lower outlook of foreign currency inflows to the Russian economy. Ukrainian attacks on Russian refineries pressed against the country’s fuel production and export availability, magnifying the previous capacity crisis that halted fuel exports.
Additionally, stricter US sanctions on Russian seaborne energy trade drove around 25 tankers to halt loading activity in February. In the meantime, the high impact of military spending on last year’s GDP flagged the sustainability of the country’s growth. #Ruble Reacts as Russia Keeps Key Rate at 16%
