HiFX comments on Russian interest rates
Andy Scott, spokesperson for FX advisory services at foreign currency specialists, HiFX, comments on Russian interest rates
Andy said: “The 100bps hike by Russia’s central bank today was expected by the market, as inflation in Russia soared to 9.1% last month and the near 40% drop in the rouble versus the dollar, added to upwards pressure on inflation. Given that the rouble weakened further following the hike, it’s clear the market was disappointed they didn’t announce further measures to get a grip on the currency and that even interest rates of 10.5% wont attract buyers.
“Russia’s economy looks in bad shape going into 2015 with the central bank predicting lower growth, whilst saying it would continue to raise interest rate if inflation risks strengthened – a toxic combination. Vladimir Putin might have stoked a nationalist spirit amongst Russians following the annexation of Crimea that has seen his approval ratings at an all-time high, but as inflation spirals upwards and if unemployment starts to rise, I suspect that the blame might be aimed at the West, but the anger directed at Mr Putin. A storm is definitely in the making, with the fall in the rouble just the beginning.”
