The Central Bank of Russia increased its policy rate beyond expectations.
The bank increased its policy rate by 100 basis points to 8.50%. The expectation of economists participating in the Bloomberg survey was to increase the interest rate by 50 basis points.
“The Central Bank of Russia keeps open the possibility of raising interest rates at its next meetings in order to stabilize inflation at a level close to 4 percent in 2024 and beyond,” the text of the resolution said.
The Wagner rebellion, which failed in June, increased the pressure created by the deterioration in foreign trade, making the ruble one of the worst performing currencies among emerging markets this year against the dollar.
“Given the strong capital outflows and the waning support of the country’s current account surplus for the currency, it is unlikely that the rate hike alone will prevent further depreciation of the ruble,” said Alexander Isakov, Bloomberg Russia Economist.