Russia’s central bank raised interest rates far more than forecast, alarmed that inflationary risks are still on the rise even after a reimposition of capital controls took pressure off the rouble.
“Current inflationary pressures have significantly increased to a level above the Bank of Russia’s expectations,” it said. The rouble extended gains versus the dollar after the rate announcement. The government’s decision this month to put up tighter restrictions on the movement of capital, a move initially opposed by the central bank, has succeeded in halting what’s still one of the steepest depreciations in emerging markets in 2023.
The stiffer rules bolster the supply of hard currency for an economy drained by capital outflows and a decline in export proceeds. The rouble, which earlier crossed the symbolic 100 per dollar threshold, has gained about 5% since the regulations went into effect, recently trading below 94 against the US currency.