Interest rates go up. Presumably there will be more intervention and re-establishment of capital controls – although that is hard to say. So when you look at the picture of the ruble bouncing…
notes: The higher the ruble, the weaker it is.
Remember, policy rates are up 350 basis points and will return to 2014 levels, if not to March 2022 levels.
If rate hikes and capital controls are not enough to stabilize the ruble, then the central bank will need to spend its reserves to buy the ruble. However, the amount of unfrozen foreign exchange available for these purchases is clearly limited, and the larger the current account deficit, the more limited the limit (discussed in this section) postal).
As of July (before latest slides), real The ruble was worth less than it was at the beginning of the war.
figure 1: Real value of ruble against basket of currencies in 2020 = 100 (blue). The higher the ruble, the stronger it is. Source: Bank for International Settlements.
more, here. please remember, interest rate defense Meaning that the level of aggregate demand is lower than it would otherwise be (i.e. you might keep the value of the ruble rising but push the economy into another recession).
