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Title: Russian rouble weakens as central bank cuts rates to 11%



May 26, 2022 04:30AM ET


By: AnalysisWatch


The Russian ruble weakened on Thursday as the central bank cut interest rates to 11% in an unscheduled monetary policy meeting and passed the end-of-month tax holiday, although capital controls kept it at not far from multi-year highs against the euro and dollar.


The central bank cut its key interest rate by 300 basis points for the third straight time, easing the cost of borrowing again after an emergency rate hike to 20% in late February, days after Russia sent tens of thousands of troops to Ukraine.


Central bank governor Elvira Nabiullina is due to speak at a banking forum on Thursday.


At 0748 GMT, the ruble was 2.6% weaker against the dollar at 60.89, down from 55.80, its strongest level since February 2018, which it hit on Wednesday, and nearing a low of the past week.


Against the euro, it lost 4.4% and traded at 63.32, after hitting a seven-year high of 57.10 in the previous session.


The ruble began to fall Wednesday from those multi-year highs as the market anticipated the bank's decision amid falling inflation expectations and as the firmer ruble curbed price growth.


Several analysts had predicted a 200 basis point cut.


The ruble has been supported so far this year by capital controls, new gas payment terms that require foreign currency to be converted into the currency and a drop in imports.


But it has now lost the support of the end-of-month fiscal period, when export-focused companies typically convert foreign currency into rubles to pay local obligations.


Russian stock indexes have been mixed.


The dollar-denominated RTS index fell 0.7% to 1230.4 points. Russia's ruble-based MOEX index was 1.7% higher at 2,378.4 points.


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