33.80% change in RUB from just last month, going from a spot rate of 51.64 in December, to a high of 70.45 today.
Russia’s central bank lowered its key interest rate as a looming recession takes precedence over stabilizing the ruble and taming runaway inflation.
Billionaire Oleg Deripaska warned that economic activity will grind to a halt after last month’s rate increase from 10.5 percent, the biggest since 1998. The central bank, which last cut its main lending rate in December 2011, raised the benchmark six times last year to tame inflation kindled by U.S. and European sanctions over Ukraine and Russia’s countermeasures.
“This was an unexpected decision since inflation remains high and the ruble continues to weaken,” Vladimir Bragin, head of research at Alfa Capital in Moscow, said by phone. “The central bank is under pressure from the government, which is facing a slowing economy and needs measures that would stimulate investments and enhance conditions for the banking system.”
Worsening tensions in Ukraine are prompting threats of stiffer sanctions as oil heads for its seventh straight monthly decline, forcing the economy of the world’s largest energy exporter to the brink of a recession.
Russia is now left with “more limited” monetary-policy flexibility, Standard & Poor’s said Jan. 26, when it cut the country’s sovereign credit rating below investment grade for the first time in a decade.
Highlighting policymakers’ challenges, Russian President Vladimir Putin’s economic aide Andrey Belousov said Jan. 15 that doing business is “impossible” at the current level of interest rates.