Impact of a depreciating currency – the Russian rouble.

Falling rouble has the Russian central bank raising interest rates by 3.5% to 12%. Last week the rouble plummeted – over 100 roubles was required to buy a 1US$. This compares to around 50 roubles in June 2022 – see graph from the FT. Also with the current account surplus diminishing the demand for roubles declined which reduced its value. The decision is to raise interest rates is to limit risks to price stability – Russia has a target rate of 4% but some inflation indicators rose over 7%. The war in the Ukraine is also driving inflationary expectations.

Impact of a falling currency

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