The huge drop in Russian currency, causing a surge in prices, turned the historic crash Monday, putting the spotlight on the Kremlin to three days of a highly anticipated speech of Vladimir Putin.
With a dip of 9.5%, the ruble has experienced one of its worst days since the period following the failure in Russia’s investment payment in 1998.
“The ruble is out of control,” summarized Chris Weafer, Macro Economist Advisory firm. “It is in free fall, for a single reason: fear. (…) The normal rules of economics do not apply and that is what makes the situation so dangerous, “he said, told AFP.
“This is a significant test for the government, they have no choice but to find a way to stop this loss and to restore confidence,” he warned.
The new fall of the Russian currency weakened by Western sanctions related to the Ukrainian crisis and the fall in prices of oil, meaning it has lost since the beginning of the year 42% of its value against the euro and 49% against the dollar. The price increase resulting expected to reach 11.5% in a year, according to the central bank.
Crossing new historic lows one after the other, the euro reached 80.09 rubles against only 72.81 rubles yesterday, and the dollar 64.23 rubles against 58.18 rubles. In the process, the RTS index of the Moscow Stock Exchange plunged 10%.
The central bank is yet occurred almost daily since the beginning of the month to support the ruble, spending a total of 5.9 billion, without success.
The new policy introduced last month –intervenir by surprise when financial stability is menacée– was supposed to punish speculators short of taking and limit the amount spent so that the country’s foreign exchange reserves have been squandered to no avail for a year
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On the night of Monday to Tuesday, it has boosted its key rate at 17 %, an increase of six and a half points.
“The decision aims to limit the considerable depreciation of the ruble,” said in a statement the Russian central bank, which had already raised a developed its policy rate last Thursday to 10.5%, nearly double its level at the beginning of the year (5.5%) to curb the movement, may affect an already economy to the brink of recession with more expensive loans.
A few hours before announcing the increase in the policy rate, the central bank had set a nightmarish picture of the coming year for Russia, warning that the gross domestic product countries could drop from 4.5% to 4.8% if oil prices stay around $ 60 a barrel, the current level.
The oil price collapse weighs heavily on the ruble and Russia’s economy, which takes the black gold half its budget revenues.
Other political factors, such as a series of US and European sanctions against unprecedented in Moscow framework of the Ukrainian crisis, saddled the Russian economy, which should go into recession in 2015.
“If you walk into a spiral where it seems that everything is wrong and that the economy s ‘collapses, no action from the central bank will stabilize the situation “, found in a business daily Vedomosti Maxime forum Bouïev, professor at the Faculty of Economics of the European University in St. Petersburg.
“The government must provide a clear plan for reforms,” he added
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The pressure strengthens Putin on Thursday which gives its major annual press conference. Russian President has a record popularity since the annexation of the Crimea, but the population shows increasingly pessimistic about the evolution of its standard of living.
The mayor of Moscow and raised the tone Monday after finding that the stores now setting their prices in foreign currencies, and warned that this practice would be punished by heavy fines.
To support the economy, the president announced a tax moratorium two years for newly established companies and an amnesty for capital that would return to Russia, promising that their home would not be a problem.
But these measures were met with skepticism and now seem laughable given the slump ahead.
For the firm Capital Economics, “the new sharp fall of the ruble (Monday) will fuel speculation on the fact that the authorities may resort to less unorthodox measures to stabilize the currency, including capital controls “measure for now rejected that, according to these experts,” ruin credibility of Russia on the international markets. “
” It’s hard to be patient and hope that the observed rebound (after the crisis) will be repeated in 2008, as the situation has changed dramatically “ruled Monday the Nezavisimaya Gazeta newspaper quoted Western sanctions.
Prime Minister Dmitry Medvedev seems to him more concerned to maintain fiscal stability, threatened by the fall of almost half the price of oil. According to Vedomosti newspaper, he asked departments to reduce 10% of budget expenditures next year.
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