The ruble weakens, Russia forced to once again raise its key rate

2023-09-15 11:31:00

[Article publié le vendredi 15 septembre à 13H31 et mis à jour à 14H04] The Russian Central Bank (BCR) announced this Friday, September 15, to raise its key rate from 12% to 13%. This is the third consecutive increase in less than two months. It aims to both counter inflation and the weakening of the ruble.

In front of ” inflationary pressure in the Russian economy (which) remains high » et « the weakening of the ruble this summer », « further monetary tightening is needed », Explained the BCR in a press release.

Thus, “the board of directors of the BCR decided to increase the key rate by 100 basis points to bring it to 13%,” indicated the monetary institution.

On Friday, you had to pay 96.5 rubles to get a dollar and 102.8 for a euro. In these conditions, ” the return of inflation to target and its stabilization at almost 4% also implies a prolonged period of maintaining tight monetary conditions in the economy “, the Russian Central Bank said this Friday.

The ruble at its lowest once morest the dollar and the euro since March 2022

Another sign that the situation is considered delicate by the BCR, it intervened on the foreign exchange market on Thursday to support the ruble, by multiplying its daily currency sales by ten, until September 22.

Not“absolutely insurmountable difficulties”

For several weeks, the free fall of the ruble has been inexorably accompanied by a return of inflation (+5.15% in August). However, rising consumer prices add to the growing cost of the Ukrainian conflict, making many Russians fear for their standard of living.

On September 12, Vladimir Putin nevertheless declared that he did not see any “ insurmountable problems » in the weakening of the ruble for weeks once morest the dollar and the euro, despite the efforts of the Russian Central Bank. “ Overall, I don’t think there are any absolutely insurmountable problems or difficulties », declared the head of the Kremlin, during the plenary session of the Eastern Economic Forum which was held in Vladivostok (Russian Far East).

The weakening of the ruble at the beginning of August, however, pushed the Russian Central Bank to urgently raise its key rate from 8.5% to 12% — following a previous increase on July 21 (from 7.5% to 8.5%). — a way to combat inflation and the volatility of the national currency. HAS at that time, it was in fact necessary to pay 100 rubles to obtain a dollar and 109 for a euro, exchange rates more observed since the very beginning of the Russian offensive in Ukraine and the cascade of the first sanctions in the first quarter of 2022 which had affected the Russian economy.

One of the main causes of the fall of the national currency is, in fact, the state of foreign trade. Russia is suffering in particular from the considerable drop in revenues linked to the sale of its hydrocarbons, under the effect of the determination of Europeans to end their energy dependence on Moscow.

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Russian bosses opposed to rising rates

The BCR’s announcement on Friday, however, may not satisfy all the big Russian bosses. In recent days, the CEO of the first national bank Sberbank, German Gref, and Andreï Kostine, the boss of his rival VTB, had, in fact, said in favor of maintaining the key rate at 12%. According to him, ” the measures taken by the BCR to maintain financial stability will necessarily affect economic growth, all companies will feel it, and banks too » due to the increased cost of credit and therefore investments, he warned at the start of the week on the sidelines of an economic forum in Vladivostok.

Force large exporters to repatriate and convert their currencies into rubles

In recent months, a standoff has also developed between the BCR, with Elvira Nabioullina at its head, according to whom we must not intervene more than necessary in the national economy at the risk of weakening it, and the Ministry of Finance, headed by Anton Siluanov, a supporter of stronger control of capital movements in the country. In mid-August, following the key rate was raised, the two leaders had a meeting with Vladimir Putin, establishing a the state in which temporary while waiting to see the evolution of the indicators.

A month later, the BCR was therefore forced to decide and the authorities might even decide to act beyond just the variation in the key rate. The Ministry of Finance is in fact pushing to reintroduce an obligation for large Russian exporters to repatriate and convert their currencies from their earnings abroad into rubles, forcing them to no longer store them outside Russia despite the sanctions, so as to what these revenues integrate into the Russian economy and support the ruble.

Last Tuesday, Vladimir Putin also considered that the difficult situation facing Russia was also linked “ the non-return of part of the foreign exchange earnings of our largest exporters ». Et « imports are arriving in our market in increasingly large volumes » compared to 2022, added the leader, “ which means that foreign currencies are increasingly in demand ”, automatically weakening the ruble.

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The solution advocated by the Ministry of Finance had already been put in place at the beginning of 2022 to try to limit the effects of heavy international sanctions, before gradually making it disappear, satisfied with the macroeconomic indicators.

At the national level, the authorities are also concerned regarding the emergence of a speculative bubble driven by too large a volume of credit, also fueling the rise in prices. Vladimir Putin had thus called on the authorities to “ mitigate these risks ” in front of ” rapid growth in consumer loans ».

(With AFP)