Responding to a rapidly deteriorating ruble, the Bank of Russia hiked its key interest rate on Tuesday by 3.5 percentage points to 12%.
The Bank of Russia said steady growth in domestic demand was surpassing the capacity to expand output.
At the same time, elevated demand for imports has impacted the ruble.
“Consequently, the pass-through of the ruble’s depreciation to prices is gaining momentum and inflation expectations are on the rise,” the central bank said, in an emergency meeting that had been called on Monday. “The decision is aimed at limiting price stability risks.”
The dollar USDRUB, +1.19% was trading at 96.15 rubles after topping 102 on Monday, when the Russian currency sank to its lowest level since a month after its full invasion of Ukraine in February 2022.
The dollar has surged 30% vs. its Russian counterpart this year.