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Russian Central Bank hikes interest rates to prop up falling ruble

by Martin Fornusek and The Kyiv Independent news desk August 15, 2023 4:04 PM 1 min read
The Russian flag flies above the headquarters of the Russian Central Bank in Moscow, Russia, on March 18, 2016. (Photo credit: Andrey Rudakov/Bloomberg via Getty Images)
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Russia's Central Bank hiked its key interest rate by 350 basis points to 12% on Aug. 15 in an attempt to halt the sharp decline of the ruble.

The decision came after an emergency meeting called when the ruble briefly broke through 100 to the U.S. dollar on Aug. 14 for the first time since March 2022.

The currency exchange rate has since then slightly dropped below the 100 threshold only to steadily rise to 99.08 by 4:02 p.m. Moscow time. Bloomberg commented that the move failed to prop the currency up as it remains among the three worst performers in developing economies this year.

Despite a summer bump in oil revenues, the Russian economy continues to be battered by Western sanctions and the costs of waging war in Ukraine. More countries have divested from Russian oil and gas, slashing Russia's export income to half its prewar levels.

Moreover, Russia has doubled its 2023 military spending to over $100 billion, or a third of the state budget.

Maxim Oreshkin, economic adviser to Russian dictator Vladimir Putin, blamed the ruble's fall on Moscow's central bank.

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