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June 30, 2022

The ruble hits a new seven-year high! Russia's central bank considers further rate cuts to boost economy

On Wednesday (June 29) local time, the exchange rate of the Russian ruble hit a new high in nearly seven years.


According to data released by the Moscow Exchange, the exchange rate of the US dollar against the Russian ruble fell below 51 for the first time since May 2015; the exchange rate of the euro against the Russian ruble once fell below 53, the first time since April 2015.


The Kremlin sees the surge in the ruble as "evidence" that Western sanctions are not working, but a too high exchange rate usually causes exports to fall and imports to rise, adversely affecting the balance of payments.


Last week, Russian First Deputy Prime Minister Belousov said that the best exchange rate for the Russian economy is 70 to 80 rubles per dollar, and Russia must return the ruble to this range as soon as possible.


The Governor of the Bank of Russia, Nabiullina, said that as inflation falls, the Bank of Russia will further reduce the key interest rate. The bank also said no deflation was observed.


Nabiulina said that Russian banks are currently in a stable state, and there is no need for systematic recapitalization, and the adjustable foreign exchange policy reduces the autonomy of monetary and credit policies. The Bank of Russia also advised Russian companies to repay foreign currency loans ahead of schedule. The Central Bank of Russia may also temporarily participate in currency portfolio transactions on exchanges to provide liquidity support

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