Russia hikes interest rate as hackers mock Putin over slide against US dollar
Joel Gehrke
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Russia raised interest rates in an emergency session of finance officials after a Kremlin aide issued a public demand that they halt the ruble’s embarrassing slide against the U.S. dollar.
“The decision is aimed at limiting price stability risks,” the Russian Central Bank said in a brief statement on the 3.5% rate increase.
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That dramatic rate hike occurred shortly after the Russian currency declined to the point that 100 rubles wouldn’t equate to a single U.S. dollar. Russian President Vladimir Putin mocked President Joe Biden last year for blaming inflation on Russia’s invasion of Ukraine, but the ruble’s depreciation proved intolerable for the image-conscious Kremlin.
“One thing that we know, in general, about Putin’s administration is that they are far deeper on symbolism than any Western government,” expatriate Russian economist Konstantin Sonin, a critic of Putin, told the Washington Examiner. “Obviously this cannot change any kind of medium-term or long-term dynamics. I mean, in the short term, these things do not matter much. So I think this is very much about symbolism.”
Russia’s Central Bank leaped into action after public criticism from one of Putin’s top economic aides.
“Soft monetary policy is the main source for the ruble’s weakening and acceleration of inflation,” Kremlin aide Maxim Oreshkin wrote on state-run TASS. “The Central Bank has all necessary tools for normalizing the situation as early as in the near future and lowering lending rates to sustainable levels.”
Oreshkin’s missive wasn’t quick enough to preempt at least one outburst apropos of the weak ruble. The ticker of a Siberian news agency apparently was hacked and edited to pour scorn on Putin, despite the draconian punishments that await Kremlin critics.
“100 roubles to the dollar,” the ticker sneered, according to a translation from the Insider, an independent Russian outlet. “You a**hole. Putin is a c**t and a thief.”
Russian analysts and state media projected a 1- or 2-point rate increase in the wake of that not-so-subtle prod, but the banking chiefs dwarfed that projection by raising rates from 8.5% to 12% despite Putin’s previous acknowledgment that high rates hamper the economy.
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“Businesspeople know, of course, that a high key rate clearly slows economic development,” the Kremlin chief said last year. “But it is a boon for the people in most cases. They have reinvested a substantial amount of money in banks due to higher interest rates.”
Those concerns are taking a backseat to public relations. “Apparently, the symbolism of $1 trading for 100 Rubles matters,” Sonin wrote on social media. “Nowadays the main pressure on ruble comes from the ever-increasing war spending. It’s not yet fully ‘money printing’ as the government cuts spending on health care, education, etc. Yet the deficits are widening, both because of the fall in revenues and increase in military spending.”