Russia’s Faltering Ruble Raises Concerns: Inflation Soars, Adding Pressure on Putin’s Government

The Russian ruble continues its downward spiral, fueling fear and uncertainty within the country. The freefall is forcing Moscow to hit the brakes on inflation through a measure that consumers will feel directly: a steep hike in interest rates.

Already at a 21 percent – the highest since 2003 – key interest rates look set for a further increase. Kirill Tremasov, a central bank advisor highlighted by that “there is practically no doubt the board of the Central Bank will discuss the question of a further increase” at its December meeting. ”

The ruble’s weakness shines a stark light on the broader economic challenges the Kremlin faces. First signs of the currency’s descent emerged in August, when its value began to plummet, shedding nearly a quarter of its value against the dollar.

Several factors are driving the decrease. Sanctions imposed by Western powers are taking their toll, compounded by growing domestic Shells tension amid fears of military escalation.

Adding to Moscow’s burden is the recent launch of its Oreshnik medium-range missile, which has increased tensions with the West.

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## Russia’s Faltering Ruble Raises Concerns: Inflation ⁤Soars, ‌Adding Pressure on Putin’s Government

**Host:** Welcome back to the ‌show. Joining us today is Dr. Elena Petrova, an economist specializing in Eastern European​ markets. Dr. Petrova, the Russian ruble is‌ facing steep declines, and inflation ⁤is surging. What’s driving this, and what are⁢ the implications‍ for the Russian economy and Putin’s government?

**Dr. Petrova:** Thank you for having me. The ruble’s woes are ⁤multifaceted. The recent weakening ​can be partly⁣ attributed to the Kremlin’s relaxation ⁤of capital controls [[1](https://tradingeconomics.com/russia/currency)]. While intended to stimulate the economy, requiring fewer export revenues to be⁣ converted into rubles ⁤has significantly decreased demand⁢ for the currency. This, coupled with‌ other factors⁣ like international​ sanctions and the ongoing war in Ukraine, is putting downward pressure on the ruble.

**Host:** ⁣So, it seems like a deliberate move ​by the Kremlin to weaken the ruble?

**Dr. Petrova:** It’s a complex situation. A weaker ​ruble can be ‌advantageous for Russia in some ⁤ways.⁣ It makes its exports more competitive and helps finance the budget because the government receives more local currency for its export income. However, ⁣it also fuels inflation.

**Host:** And how is this inflation impacting the ⁤Russian people?

**Dr. Petrova:** Inflation, currently at 2.60%, is already ‍impacting ordinary‍ Russians [[1](https://tradingeconomics.com/russia/currency)]. The cost of essential goods ⁣ is rising, eroding purchasing power and creating financial hardship for many. This ⁢could lead to ⁢social unrest⁣ and pressure on Putin’s government to take action.

**Host:** What actions could the government take to address the situation?

**Dr. Petrova:** The government could tighten monetary policy to curb inflation, ‌but this could​ stifle⁣ economic growth. They could also re-introduce stricter capital controls to boost⁣ ruble demand, but this may be seen as a sign of weakness and further damage investor confidence.

**Host:** This⁢ situation seems like a ticking ‍time bomb. What are the potential long-term consequences for Russia if the ruble continues to decline and inflation continues to rise?

**Dr. Petrova:** If these trends continue, they could lead to a prolonged economic recession, making it harder for the Russian government to finance its war effort and maintain social stability. The ruble’s weakness also raises concerns about Russia’s long-term economic​ prospects and could deter ⁣foreign investment,⁣ further isolating ⁢Russia from the global ⁣economy.

**Host:** Thank you, Dr.⁢ Petrova, for your insights into this complex ​and critical‌ situation.