The value of the Russian ruble has reached its lowest point in almost 17 months due to Western sanctions and decreased demand for the national currency. In fact, the ruble has declined by more than 25% since the beginning of the year, hitting a low of 101 rubles to the dollar. This decline is attributed to the impact of loose monetary policy and its negative effects on economic restructuring and people’s real incomes.
Maksim Oreshkin, President Putin’s economic advisor, expressed his belief that a strong ruble is beneficial for the Russian economy and stated that the central bank has the necessary tools to stabilize the situation. Similarly, central bank deputy director Alexei Zabotkin emphasized the importance of a floating exchange rate, as it allows the economy to adapt effectively to changing external conditions.
In an effort to support the ruble and reduce volatility, the central bank announced that it would refrain from buying foreign currency on the domestic market for the remainder of the year. Normally, Russia sells foreign currency to counter any revenue shortfalls from energy exports, but given the current circumstances, the central bank has chosen a different approach.
It is worth mentioning that international sanctions have significantly limited imports to Russia, which has contributed to the fall of the ruble. However, Zabotkin dismissed the notion that capital flight from Russia is to blame for the currency’s decline.
To address the risk of rising inflation and the devaluation of the ruble, the central bank increased its key interest rate by one percent last month. This may not be the last rate hike, as Zabotkin hinted that another increase could occur at the next meeting in September.
Overall, the Russian ruble’s decline and its implications for the economy continue to be subjects of concern and attention. It remains to be seen how the central bank’s measures and potential future actions will impact the currency’s stability and the overall economic situation in Russia.
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