This is probably the clearest indicator we have that the Russian economy is really struggling.
This is the highest key interest rate in Russia since it was introduced
It’s just about 3 months ago the Russian central bank increased interest from 16 to 18%, and about a month that it was increased to 19%, and now to 21%! That’s a HUGE increase in very short time.
The central bank said in a statement that “growth in domestic demand is still significantly outstripping the capabilities to expand the supply of goods and services.
Meaning the economy can’t handle the demands put on it by the war on Ukraine.
inflation expectations continue to increase.
Meaning the value of wages is undermined. Making the average Russian poorer.
Nabiullina noted that inflation has overshot the goals because of increased government spending
Meaning the government is over spending, and the economy can’t sustain current levels.
As I mentioned last time, it’s notable that the Ruble doesn’t increase significantly in value after these increases. As I have claimed earlier, this is a sign it will get worse, and it’s gotten worse as predicted, and it will continue to get worse until the Russian economy collapses, or overspending ends because the war against Ukraine ends.
But Ukraine was invaded and is getting it under control, probably in part due to foreign aid, now it’s a more moderate 13%
So Ukraine is stabilizing, while Russia is getting worse.
Absolutely, Russia originally had a massive advantages over Ukraine, because Russia had prepared for this, and has a bigger economy.
Ukraine was caught off guard. Remember they criticized USA for warning that a Russian invasion was eminent.
Nobody (almost) believed Russia would do this. So the Ukrainian economy was hit extremely hard, but is now doing better than Russia. And yes that is damned impressive.
It’s kind of already crashing: https://www.google.com/finance/quote/RUB-USD?window=5Y
The Ruble came under stress immediately after Russia invaded Ukraine back in February 22nd 2022.
As you can see there a steep drop below 1 cent, then Russia takes a number of immediate actions to support the Ruble, and the value increased to 1.84 cent.
All these actions they took in early 2022 are still in force, yet the Ruble continues to decline, and in a little over 2 years, it has almost halved in value, despite Russian efforts to support it.
If you look at the past 3 months on the graph, you can see a very obvious decline, even when the Central Bank increased Interest rates significantly 3 times from 16% to 21%.
The Ruble is weak, and the hikes in interest rates that should stabilize it, are not effective and are undermined by the Russian economy simply being awful, and Putin becoming economically irresponsible.
By comparison most western Central/National banks have lowered interest rates, for instance the European Central Bank has lowered rates 3 times this year to now 3.4%: https://tradingeconomics.com/euro-area/interest-rate
Russia is unable to control inflation and currency rates, in an environment where the economies surrounding them are stable. So this is exclusively a Russian problem the imposed on themselves.
Nice write up! Looks like the whole Russian economy starts to detach itself from other economies too. No one wants to come to russias BRICS meeting, I wonder when russians will start trade in dollar or other…
Oh boy BRICS…
One of the principles of BRICS is non-interference, obviously Russia has no such ideal, when they invade a peaceful neighbor that actually tried to work with them. They’ve also interfered heavily in many other countries, using misinformation to undermine them.
Unfortunately BRICS is pretty massive by now, so to the degree they can agree on something, they could potentially be very powerful.
This is probably the clearest indicator we have that the Russian economy is really struggling.
It’s just about 3 months ago the Russian central bank increased interest from 16 to 18%, and about a month that it was increased to 19%, and now to 21%! That’s a HUGE increase in very short time.
Meaning the economy can’t handle the demands put on it by the war on Ukraine.
Meaning the value of wages is undermined. Making the average Russian poorer.
Meaning the government is over spending, and the economy can’t sustain current levels.
As I mentioned last time, it’s notable that the Ruble doesn’t increase significantly in value after these increases. As I have claimed earlier, this is a sign it will get worse, and it’s gotten worse as predicted, and it will continue to get worse until the Russian economy collapses, or overspending ends because the war against Ukraine ends.
EDIT:
For comparison Ukraine had interest rates above 20% in 2022 and 2023:
https://tradingeconomics.com/ukraine/interest-rate
But Ukraine was invaded and is getting it under control, probably in part due to foreign aid, now it’s a more moderate 13%
So Ukraine is stabilizing, while Russia is getting worse.
I’m actually damn surprised that Ukraine is able to keep their interest rates that low.
Absolutely, Russia originally had a massive advantages over Ukraine, because Russia had prepared for this, and has a bigger economy.
Ukraine was caught off guard. Remember they criticized USA for warning that a Russian invasion was eminent.
Nobody (almost) believed Russia would do this. So the Ukrainian economy was hit extremely hard, but is now doing better than Russia. And yes that is damned impressive.
All great information IMO, thanks!
Checked out the ruble, it’s hovering just under 100 (97.2 rubble forca dollar), I wonder when it will hit it, and potentially starting to crash dive.
Maybe the rubles “value” is in limbo though, as nobody wants to neither buy nor sell it.
It’s kind of already crashing:
https://www.google.com/finance/quote/RUB-USD?window=5Y
The Ruble came under stress immediately after Russia invaded Ukraine back in February 22nd 2022.
As you can see there a steep drop below 1 cent, then Russia takes a number of immediate actions to support the Ruble, and the value increased to 1.84 cent.
All these actions they took in early 2022 are still in force, yet the Ruble continues to decline, and in a little over 2 years, it has almost halved in value, despite Russian efforts to support it.
If you look at the past 3 months on the graph, you can see a very obvious decline, even when the Central Bank increased Interest rates significantly 3 times from 16% to 21%.
The Ruble is weak, and the hikes in interest rates that should stabilize it, are not effective and are undermined by the Russian economy simply being awful, and Putin becoming economically irresponsible.
By comparison most western Central/National banks have lowered interest rates, for instance the European Central Bank has lowered rates 3 times this year to now 3.4%:
https://tradingeconomics.com/euro-area/interest-rate
Russia is unable to control inflation and currency rates, in an environment where the economies surrounding them are stable. So this is exclusively a Russian problem the imposed on themselves.
Sorry for rambling. 😋
Nice write up! Looks like the whole Russian economy starts to detach itself from other economies too. No one wants to come to russias BRICS meeting, I wonder when russians will start trade in dollar or other…
Oh boy BRICS…
One of the principles of BRICS is non-interference, obviously Russia has no such ideal, when they invade a peaceful neighbor that actually tried to work with them. They’ve also interfered heavily in many other countries, using misinformation to undermine them.
Unfortunately BRICS is pretty massive by now, so to the degree they can agree on something, they could potentially be very powerful.