Ruble’s weakness to push up inflation

Pressure mounts for Russia’s central bank to deliver another interest rate hike
Newsfeed26 Nov 2021
    Photo credit: AFP Photo

    The ruble’s recent weakness will push up inflation in the coming weeks, Russia’s Economy Minister said, as pressure mounts for the central bank to deliver another large interest rate hike at its next meeting.

    A Russian troop buildup on the border with Ukraine has stoked concern about a possible invasion, spooking investors and triggering the ruble’s biggest daily drop since March at the start of the week. Though Russia’s central bank Governor Elvira Nabiullina was one of the first to tighten policy in Emerging Markets this year, inflation is still more than double the central bank’s 4% target, adding pressure for another substantial hike on 17 December.

    Weekly inflation readings are providing little sign of relief, with consumer price growth accelerating to 0.2% in the week ended 22 November.

    Derivative traders are paying heed. Forward-rate agreements currently point to more than 150 bps of tightening in the next three months. The central bank has raised rates by 325 bps so far this year, delivering a 75 bps increase in October that was three times the size of the hike predicted by economists. – Bloomberg News.

    On Thursday, the US Dollar Index fell 0.10% to 96.774, the euro rose 0.09% to USD1.1209, the pound lost 0.05% to USD1.3322, and the yen finished 0.06% stronger at 115.36 per dollar.

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