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Russia’s economy is taking punches it can’t dodge, with the ruble nosediving to its lowest point in over two years. On Wednesday, the currency crashed to 114 against the U.S. dollar—levels unseen since the early days of Moscow’s invasion of Ukraine. In a desperate move, the Central Bank of Russia (CBR) intervened, halting all foreign currency purchases for the rest of 2024. This was a full-blown panic button press, and by Thursday morning, the ruble inched up to 110. President Vladimir Putin, cool as ever, dismissed the crisis, saying there was “no need for panic.” He blamed the ruble’s slide on seasonal factors, budget payments, and fluctuating oil prices. “In my opinion, the situation is under control, and there are absolutely no grounds for panic,” he said. Kremlin spokesperson Dmitry Peskov shares the sentiment, insisting that the ruble’s collapse wouldn’t affect ordinary Russians since their salaries are paid in rubles. What the numbers show Experts aren’t buying the Kremlin’s confidence. A weaker ruble equals higher inflation, forcing the central bank to raise interest rates even more, which will choke Russia’s already sputtering economy. It’s ECONS 101. The central bank is already drowning in this disaster. Interest rates are at a brutal 21%, but inflation isn’t playing along. October saw an annual inflation rate of 8.5%, with food prices spiraling out of control. Butter, potatoes, and other essentials now come with jaw-dropping price tags. The government is pointing fingers at sanctions from the U.S. and its allies, accusing “unfriendly countries” of wrecking the Russian economy. But sanctions are just one piece of the puzzle. New U.S. sanctions targeting Gazprombank, the Kremlin’s third-largest bank, are adding gasoline to the fire. These measures cut Gazprombank out of any energy-related transactions involving the U.S. financial system. A wartime economy struggles Russia’s economy is a…

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Filed under: News - @ November 28, 2024 4:22 pm