Russia has raised its interest rates to 15%, intensifying its efforts to combat inflation amid labour shortages and a depreciating ruble.
The central bank increased the rates by two percentage points from the previous 13% set in September, surprising economists who had anticipated a smaller hike. This move brings interest rates to their highest level since the early stages of the Ukraine invasion in 2022.
In response to this tightening, rates have nearly doubled since the summer, primarily driven by a growing scarcity of labour, which has led to price hikes.
The central bank explained in a statement that “current inflationary pressures have significantly exceeded the Bank of Russia’s expectations, with domestic demand consistently outstripping the capacity to expand the production of goods and services.”
Additionally, the Kremlin has been working to stabilize the ruble, which had reached a psychologically significant level of 100 against the US dollar earlier in the summer. The ruble saw a slight strengthening, reaching 93 per dollar following the announcement.
According to the central bank, inflation for the year up to October stood at 6.6%, up from 6% in September. The bank also projected that inflation could reach 7.5% by the end of the year.
The central bank noted, “Higher inflationary pressures are observed across a wider range of goods and services. This situation is driven, among other factors, by the ruble’s depreciation and labour shortages, which encourage businesses to pass on higher costs to consumers.”
The Russian ruble has seen a significant surge, reaching its highest level in over six weeks following an unexpected interest rate hike by the central bank.
The Russian currency strengthened by 1.4% against the US dollar, reaching a rate of 92.66, marking its strongest performance since September 12. Against the euro, it gained 1.8%, trading at 97.81, and against the yuan, it rose by 1.2% to 12.63.
This increase in the ruble’s value came as a response to The Bank of Russia’s decision to raise its key interest rate by 200 basis points to 15%. This move was prompted by the weakening ruble and labour shortages that have led to rising prices in the country
