Russia cuts rates again to contain soaring ruble Business

The ruble fell 6.9%, after falling 5.7% on Wednesday.

After plunging to nearly half of its pre-war value following the invasion of Ukraine, the currency quickly recovered, buoyed by Russia’s massive trade surplus and capital controls. Its trade surplus hit $58 billion in the first quarter of the year, the highest in recent history.

The central bank meeting was brought forward two weeks and took place earlier in the day than usual. There was no accompanying press conference by Elvira Nabiullina, its governor.

Official data indicates that annual consumer price inflation hit 17.8% in April, the highest since the early years of Vladimir Putin’s regime.

William Jackson of Capital Economics said the move “was clearly driven by the remarkable rally in the rouble”, which traded at 60 to the dollar earlier in the week. Before the invasion, it traded around 75 rubles to the dollar, but in March it fell almost 140.

The strength of the ruble worries the Kremlin because it risks making the income of Russian exporters less valuable on the domestic market, which could tip the country into a budget deficit.