Moscow, Russia - Russia's central bank unexpectedly hiked interest rates by 350 basis points to 12% on Tuesday in an emergency move after public criticism from the Kremlin over monetary policy.
The rate increase came as the Russian rouble plunged over the past week, nearing 100 against the US dollar. Western sanctions imposed over the Ukraine invasion have hit Russia's balance of trade while military spending has increased.
Russian President Vladimir Putin's economic adviser Maxim Oreshkin publicly rebuked the central bank on Monday, blaming its "soft monetary policy" for weakening the rouble. Just hours later, the central bank announced the emergency policy meeting.
In a statement, the central bank said inflationary pressures are rising and the rouble's depreciation is being passed through to higher prices. Annual inflation is back above the 4% target.
Central bank governor Elvira Nabiullina has faced criticism from nationalist circles as consumers struggle with rising costs. The public disagreement with the Kremlin adds political pressure as Russia heads toward elections in March 2024.
While the sharp rate hike may temporarily support the sagging rouble, economists say sanctions limit Russia's access to capital inflows needed to stabilize the currency longer-term. With inflation accelerating, the central bank was forced to act decisively despite facing strong headwinds.
