from Bloomberg:
“Soft monetary policy is at the root of the ruble’s devaluation and accelerating inflation,” the chief economic adviser to Russian President Vladimir Putin wrote in a rare column published by the state news agency Itar-Tass. Russia needs a strong ruble and policymakers have the necessary tools to normalize the value of the currency in the near future, he said.
Here are two pictures of the ruble exchange rate (a gain is a depreciation against the dollar) over the past week.
Note that the current value reflects the central bank’s decision to stop buying foreign currency. The policy rate decision is due at 10:30 am local time tomorrow. The current discount rate is 8.5%.My reading of the consensus among Western economists is that around 10% is needed to stabilize the ruble by the end of the year (while hitting the economy; see this postal Graphical explanation for the Russian situation in IS-LM-BP=0).
Note that this is all happening against the backdrop of strict capital controls. Against this backdrop, the deteriorating trade balance played a role.
