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Wednesday, February 1, 2023

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Moscow cuts rates to 11%, halts the ruble’s run

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Pensions, Salvini.

The Russian central bank cuts interest rates from 14% to 11% and prepares for further scissors. The message arrives loud and clear where Moscow wants it to arrive: on the foreign exchange market, where the ruble had hoisted to its highest dollar since 2015, protected by the capital control measures put in place by the Russian government and its central bank close behind. of the outbreak of the war, but which now threaten Russian tax revenues and exports.

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The ruble, which had hit a high of 55 against the dollar two days ago, recovering well over 100% from the lows of 140 to which it collapsed at the end of February, continued the sharp correction that began yesterday, when the announcement of the extraordinary meeting of the central bank, accompanied by a downward revision of the inflation outlook, had prepared the market for the cut. The Russian currency has come to lose 8% against the dollar, slipping to almost 65.

On the other hand, a too strong ruble risks hurting both the government, which spends in rubles but collects part of the tax revenues related to energy in foreign currency, and exporting companies. “A strong ruble makes Russian products less competitive,” the Ministry of Economy said, according to TASS.

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The strength of the ruble, heralded in a propaganda key, does not mean that the sanctions are not hurting. “The external conditions for the Russian economy are still challenging, significantly limiting economic activity”, which risks a double-digit contraction in 2022. “The next few quarters will not be easy. While the economy is adapting it will be tough for businesses and citizens,” Governor Elvira Nabiullina said, Tass reports. Russia is heading towards technical default after the US Treasury denied the renewal of the exemption on payments relating to Russian bonds. A fate that could also affect many companies: the Credit Bank of Moscow reiterated that its ability to pay coupons is “still limited” due to British sanctions.

Source: Ansa

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