MOSCOW (Reuters) - President Vladimir Putin's economic adviser chastised the central bank on Monday as the ruble tumbled past 101 to the U.S. dollar, blaming its 30 percent year-on-year decline on loose monetary policy and revealing growing disagreements between Russia's monetary authorities.
The ruble, which has lost about a quarter of its value against the dollar since Putin sent troops to Ukraine in February 2022, hit 101.04 per US dollar, its weakest point in nearly 17 months. As the ruble fell, Putin's economic adviser Maxim Oreshkin said. in an op-ed for the TASS news agency that the Kremlin wanted a strong ruble and expected normalization soon, a move that could spur the central bank into action ahead of its next scheduled interest rate decision on Sept. 15.
"The main source of the weakening of the ruble and the acceleration of inflation is the soft monetary policy," Oreshkin wrote. "The central bank has all the tools to normalize the situation in the near future and ensure that interest rates on loans are reduced to a sustainable level."The weak ruble complicates the structural transformation of the economy and negatively affects the real income of the population," he said. "It is in the interest of the Russian economy to have a strong ruble."
Russia's central bank, which raised rates by 100 basis points to 8.5% in July, blamed the ruble's sharp decline this year on Russia's shrinking current account surplus - down 85% year-on-year in January-July.On Monday, the bank said it saw no risks to financial stability from the weakening ruble, sending another hawkish signal that a rate hike is possible soon.
The ruble has taken a turbulent course since Russia's invasion of Ukraine, plunging to a record low of 120 against the dollar in March last year before recovering to a more than seven-year high a few months later, supported by capital controls and rising export earnings.
Before the war, the ruble traded at about 75 to the dollar. "The weaker ruble is a damning indictment of Russia's war in Ukraine," Timothy Ash, senior sovereign strategist at London-based BlueBay Asset Management, said in an email.
“This is due not only to lower energy revenues due to the loss of much of the European gas business, but also to the success of the G7 oil price cap, the much higher cost of imports due to sanctions and the resulting continued capital flight. "
To stem the fall in the ruble, Russia could reimpose tighter capital controls. Another option would be to raise interest rates, something the central bank already intends to do given high inflation, but that limits the potential for economic growth and means higher interest rates for the government as it tries to finance military operations in Ukraine.
Last week, Russia effectively abandoned its budget rule and the central bank halted the Treasury's foreign exchange purchases to try to reduce volatility. Analysts widely agreed that these measures alone were too minimal to significantly support the currency. "The central bank is not fully in control," Moscow-based independent economist Ian Melkumov told Reuters, though it has aggressive tools it is currently reluctant to do. use.
He said the bank could raise rates drastically, as it did to 20% shortly after Russia launched what it called a "special military operation" in Ukraine. A move of even 15% would stop the ruble from falling, he said. "(But) the central bank doesn't want to kill the economy and businesses in the same way it did last year." By Alexander MarrowEditing by Gareth Jones
The recent sharp decline of the Russian ruble, which crossed the critical level of 101 against the US dollar, prompted the Kremlin to address the issue and point to the effects of loose monetary policy. These developments have significant implications for the Russian economy, global markets and foreign exchange traders. In this article, we delve into the factors behind the fall of the ruble, explore the Kremlin's view on the matter, and analyze the possible consequences. Kremlin, ruble slide, 101 vs dollar, loose monetary policy, Russian economy, global markets, forex traders.
Understanding the slide of the ruble:
The exchange rate of a national currency, such as the Russian ruble, against major world currencies, such as the US dollar, is influenced by various economic and geopolitical factors. A key factor coming into play recently is the perceived impact of loose monetary policy. exchange rate, economic factors, geopolitical factors, loose monetary policy.
Kremlin perspective:
Russian authorities have pointed to loose monetary policy as a contributing factor to the ruble's decline. The Central Bank of Russia, responsible for monetary policy, pursues a policy of low interest rates and increased money supply to stimulate economic growth. However, this approach has its risks, especially when it comes to currency stability. Russian authorities, Central Bank of Russia, low interest rates, money supply, economic growth, currency stability.
Impact on the Russian economy:
A weaker ruble could have mixed effects on the Russian economy. On the one hand, it can increase exports by making Russian goods more competitive on the global market. On the other hand, it can lead to inflationary pressures, higher import costs and potential capital flight. weaker ruble, exports, global market, inflation, import costs, capital flight.
Global Markets and Forex Traders:
The ruble's fall of 101 against the dollar has raised concerns among foreign exchange traders and global investors. Currency fluctuations can create both opportunities and risks for traders, and market volatility often follows such significant movements. Traders will closely monitor the reaction of the Kremlin and possible interventions in the currency market. forex traders, global markets, currency fluctuations, market volatility, Kremlin response, currency market intervention.
The Kremlin's acknowledgment of the role of loose monetary policy in the ruble's slide to 101 against the dollar underscores the delicate balance central banks must strike between stimulating economic growth and maintaining currency stability. The outcome of this situation will have far-reaching consequences not only for the Russian economy, but also for global markets and forex traders, who are watching developments closely. central banks, economic growth, currency stability, Russian economy, global markets, forex traders.
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