This pool image distributed by Sputnik agency shows Russian President Vladimir Putin meeting with the Tver region governor at the Kremlin in Moscow on August 9, 2023.
Mikhail Klimentyev | AFP | Getty Images
The Russian ruble briefly notched 100 to the U.S. dollar on Monday, nearing a 17-month low as President Vladimir Putin’s economic advisor blamed loose monetary policy for the rapid depreciation.
The ruble has lost around 30% against the greenback since the turn of the year. The Bank of Russia has blamed the country’s shrinking balance of trade, as Russia’s current account surplus fell 85% year on year from January to July.
By mid-afternoon in London, the ruble was trading just above 101 to the dollar. Russia’s central bank later announced it will hold an extraordinary rate meeting on Tuesday. In a statement, it said the meeting will be held “to consider the issue of the key rate level” and it would announce the board’s decision at 10:30 a.m. Moscow time.
Putin’s economic advisor, Maxim Oreshkin, told Russia’s state-owned Tass news agency that the depreciation of the currency and acceleration of inflation was mainly due to “loose monetary policy” and that the central bank has “all the necessary tools to normalize the situation in the near future.”
“A weak ruble complicates the restructuring of the economy and negatively affects the real incomes of the population. In the interests of the Russian economy — a strong ruble,” he said, according to a Google translation.
The central bank on Thursday halted foreign currency purchases for the rest of the year in a bid to shore up the currency, which is fueling fears of rising inflation as Russia attempts to fundamentally transform its economy in the face of increasing isolation and punitive Western sanctions.
Russian GDP exceeded expectations to grow by 4.9% year on year in the second quarter, new figures from the Federal State Statistics Service showed Friday, rebounding from a 1.8% contraction in the first quarter.
But William Jackson, chief emerging markets economist at Capital Economics, noted that limited slack in the economy is likely to further fuel inflation pressures and result in monetary policy tightening, potentially weakening growth over the remainder of the year and into 2024.
“Perhaps the key risk to the economy is if the government keeps fiscal policy loose to support the war effort, which would cause Russia’s economic vulnerabilities to worsen further,” Jackson added.