Article 6DVSX Interest rate hike just a sticking plaster for Russia’s war-fuelled economic woes

Interest rate hike just a sticking plaster for Russia’s war-fuelled economic woes

by
Larry Elliott Economics editor
from on (#6DVSX)

Further tough decisions will be needed while the Kremlin continues to spend large sums on its Ukraine invasion

Protracted wars are costly and cause economic damage. Ancient Rome discovered that, as did the US in the 1960s when the conflict in Vietnam was one factor behind pressure on the dollar that led eventually to the breakup of the Bretton Woods fixed currency system.

The decision by Russia's central bank to raise interest rates from 8.5% to 12% to defend the plunging rouble is the latest example of this age-old truth. Eighteen months into the war with Ukraine, Russia's current account surplus is shrinking and inflationary pressure is growing. The currency is taking the strain, and the trigger for Tuesday's emergency move appears to have been the rouble hitting 100 to the US dollar on Monday.

Continue reading...
External Content
Source RSS or Atom Feed
Feed Location http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link http://feeds.theguardian.com/
Reply 0 comments