The Russian Central Bank raises interest rates to 12 percent as the ruble falls

in statement On Tuesday, following its move at an emergency meeting, the Central Bank did not mention the depreciation of the ruble. Instead, the bank attributed the rise in interest rates to “inflationary pressure”. Because of the “steady growth in domestic demand that exceeds the ability to expand production.”

The ruble’s decline, and the increasing pressure on the economy, comes at a time when sanctions have hit Russia’s trade balance, and military spending has risen as a result of the grinding war in Ukraine.

While the bank insisted earlier on Monday that the sudden depreciation would not harm the country’s overall financial stability, Putin’s economic adviser Maxim Oreshkin appeared to lash out at the bank, writing in an editorial for the state news agency TASS that the source of the ruble’s weakening was “soft monetary policy.” .

Oreshkin wrote: “The Central Bank has all the tools to normalize the situation in the near future.”

The budget deficit and large labor shortage also contributed to the high inflation.

More than 40 percent of Russian industrial enterprises reported a shortage of workers last month, according to it poll – An acceleration of a trend that has been emerging since September, when Putin launched a nationwide military mobilization to support Russian forces in Ukraine.

Russian economist Sergei Guriev, dean of Sciences Po University in France, said the ruble’s decline against major world currencies was “politically significant” because that is what the Russian public feels and sees on a daily basis.

“The difference between 50 rubles to the dollar in 2020, and 100 today is something that every citizen can watch … even those who have been convinced and brainwashed by television propaganda,” Guryev told The Washington Post.

“This depreciation is hitting Russian households. … On the other hand, when the Central Bank raises the interest rate, it also affects Russian borrowers, businesses and households with outstanding loans. This will slow the Russian economy and thus undermine the increase in real income and purchasing power.” To enter Russian citizens. There is no doubt about it.”

He said the new currency depreciation is a reflection of “a reality where Russia no longer exports so much and imports so little,” adding that a western boycott of most Russian oil only began to emerge at the beginning of this year.

He added that the recent rebellion against the Russian military leadership by Wagner’s mercenary chief Yevgeny Prigozhin, as well as the confiscation of Western companies still operating in Russia, also contributed to the outflow of capital and helped weaken the ruble.

Sergei Aleksachenko, Russia’s former deputy finance minister, told The Post that the ruble’s depreciation resulted from “growing distrust of Putin’s economic policy and the country’s future,” and said Putin’s order to replace dollar and euro payments for Russian exports with “friendly currencies” reduced the supply of dollars. and euros needed for imports.

Some economists downplayed the sudden currency depreciation, noting that it represented a consistent pattern of currency depreciation and accelerating inflation since the invasion, rather than a spontaneous crisis.

Aleksachenko said that the rate hike will not produce any visible economic impact.

“Maybe the current acceleration will depreciate a tsunami, but that didn’t happen in the past,” said Oleg Itskoky, professor of economics at the University of California, Los Angeles. “So it is not very likely, though not impossible, unless it causes panic and a mass conversion of savings from rubles to dollars by the wider public.”

Guryev also said that he does not consider the latest developments to be seriously harmful to the Russian economy.

“I think it is natural for the Russian Central Bank to remain committed to the inflation target and raise interest rates when it sees that inflation is getting out of control,” he said. “On the other hand, the question is to what extent further depreciation is possible if the Western alliance can tighten the pressure of sanctions on the Russian economy.”

This is not the first time the bank has taken emergency action during a crisis. At the end of February 2022, just days after the invasion, the bank raised its key interest rate to 20 percent from 9.5 percent.

And in 2014, after Russia’s illegal annexation of Ukraine’s Crimea and an initial set of Western sanctions, the bank raised the country’s interest rate to 17 percent from 10.5 percent.

Such increases, which rank among the largest ever announced by the bank, reflect actions taken during the 1990s when Russia defaulted on its debt and devalued the ruble.

Elsewhere in Russia, a retired GRU military intelligence colonel Vladimir Kvachkov – a staunch pro-war figure – was found guilty by a Moscow court on Tuesday of defaming the military, just as the Kremlin seeks to subjugate its pro-war nationalist critics.

The 74-year-old retired colonel — who served in the GRU military intelligence agency and who advocated a tougher approach in the war against Ukraine — told the court that Putin, Defense Minister Sergei Shoigu, and Chief of the Russian General Staff Valery Gerasimov were slandered by Russian media, Medizona reported from the court. the reputation of the military, before the judge, Alesya Orekhova, sharply dismissed him.

Kvachkov was fined 40,000 rubles, about $408, in the case, reinforcing the message that Russian authorities will no longer tolerate criticism of the military’s conduct in the war, even from pro-war former military officers.

The case follows the indictment last month of pro-war nationalist Igor Girkin, who was arrested on charges of inciting extremism over his criticism of Putin and his demands that Russia take a tougher approach to the war.

Meanwhile, Russia in Ukraine attacked the western region of Lviv with cruise missiles in the early morning hours, according to the region’s governor. Maxim Kozitsky. He said that at least 20 homes were destroyed, including one that served as a kindergarten. He said 15 people were injured, including a 10-year-old and a 72-year-old.

The British Broadcasting Corporation (BBC) reported that three suspected Russian spies who lived and worked in the United Kingdom were charged in a major national security investigation in Britain on Tuesday, describing them as Bulgarian citizens.

London’s Metropolitan Police said in a statement that five people were arrested in February and three were subsequently charged under the Official Secrets Act with possession of “false identity documents with improper intent”.

The police did not specify what the documents were. The BBC reported that police investigations revealed that the suspects were working for the Russian security services and had passports, identity cards and other documents for Britain, Bulgaria, France, Italy, Spain, Croatia, Slovenia, Greece and the Czech Republic.

Police have identified the three accused as Orlin Rosev, 45, Paizer Dzhambazov, 41, and Catherine Ivanova, 31. Dzhambazov and Ivanova shared the same address of residence.

Carla Adam in London and Robyn Dixon in Riga, Latvia, contributed to this report.