Having soared to multi-year highs against the dollar and euro in the last month, the Ruble is sliding overnight following a larger-than-expected 300bps rate-cut by The Bank of Russia (CBR).
Economists were expecting a 200bps cut and so the bigger than expected cut has sparked a 12% decline in the Ruble against the dollar for now…
The Ruble had more than doubled its buying power relative to other fiat currencies since early March as CBR's Elvira Nabiullina masterfully stalled the freefall and engineered its recovery with capital controls and forced dollar sales, helped further by Putin's Rubles-for-Gas scheme.
After 900bps of easing since April, Nabiullina said she still sees room for further rate cuts at meetings ahead.
“The coming quarters won’t be easy,” Nabiullina said at a banking industry conference, according to Tass.
“While the economy is adapting it will be hard for companies and citizens.”
The quicker-than-expected ebbing of Russia's inflation rate provided some added confidence in CBR's decision, and as the chart above shows, with the latest rate cut, it’s now reversed almost all the emergency monetary tightening after the invasion of Ukraine three months ago.
However, as Bloomberg reports, investors were skeptical about how much policy makers can do to keep the gains from resuming because the ruble’s exchange rate is now almost entirely determined by the trade balance.
“I do not think that the decision of the central bank will help to weaken the ruble in the absence of a carry trade,” said Dmitry Kosmodemiyanskiy, an asset manager at Otkritie.
“Everyone sees the trade balance and only a madman would play against it.”
Following President Biden's dismissal of the currency as "Rubble", President Putin has touted the ruble’s strength as a sign that the country has survived the unprecedented sanctions imposed by the US and its allies to punish Moscow for its invasion of Ukraine.