The Bank of Russia (CBR) has stated that the depreciation of the ruble does not pose any risks to the country’s financial stability, according to the CBR’s press service. The Russian currency experienced a decline at the start of the week, reaching its lowest level against the US dollar and the euro since March 2022, with an exchange rate of 101 against the American currency and 111 against the euro.
The CBR explained that the ruble’s depreciation is due to a significant reduction in the value of exports combined with an expansion in demand for imports. This increase in import demand is attributed to the active growth in domestic demand, particularly driven by high rates of lending and sustained government demand. These factors have contributed to the overall weakening of the ruble, as stated by CBR’s Deputy Chairman Aleksey Zabotkin.
In response to rising inflation, the CBR has indicated the possibility of a key interest rate hike at its next meeting on September 15. In fact, the bank had already increased the key rate to 8.5% per annum during its last meeting on July 21. Prior to that, the rate had remained unchanged for several consecutive meetings since October of the previous year.
Despite the recent sharp depreciation of the ruble, President Vladimir Putin’s economic adviser, Maksim Oreshkin, expressed confidence in the currency’s stability, noting that the central bank has the necessary tools to normalize the situation in the near future. This suggests that the Russian government remains optimistic about the short-term outlook for the ruble.
It is important to closely monitor the ruble’s performance and any potential further depreciation, as this could have implications for the Russian economy. However, the CBR’s reassurance regarding financial stability and the assertion that the central bank has the means to address the situation may help instill confidence in the market.
In conclusion, the ruble’s recent depreciation against major currencies does not appear to pose significant risks to Russia’s financial stability, according to the CBR. The key factors contributing to the ruble’s weakness are the decline in export value and the increased demand for imports driven by domestic economic growth. Although a key interest rate hike is possible in response to rising inflation, the CBR believes it can effectively manage the situation. It remains to be seen how the ruble will evolve in the coming weeks, and market participants will continue to evaluate the potential impact on the Russian economy.