The 3.5% increase comes a day after the ruble tumbled to its weakest level since March 2022
The Bank of Russia raised interest rates by 350 basis points to 12% at an emergency meeting on Tuesday in a bid to halt the rapid depreciation of the ruble against world currencies.
“Inflationary pressure is building up… The decision is aimed at limiting price stability risks,” the regulator said in a statement.
The central bank added that demand in the economy has exceeded the country’s ability to expand output, increasing inflation and affecting “the ruble’s exchange rate dynamics through elevated demand for imports.”
“Consequently, the pass-through of the ruble’s depreciation to prices is gaining momentum and inflation expectations are on the rise,” it noted.
On Monday, the ruble sank to a 16-month low against the dollar and euro, reaching 101 versus the greenback, and 111 against the European single currency.
The ruble strengthened early on Tuesday ahead of the regulator’s statement, but later slid back, and was trading around 98 to the dollar and 107 to the euro at 11:44am local time in Moscow.
The Bank of Russia announced an extraordinary meeting shortly after the sharp depreciation to reassess the key interest rate, which previously stood at 8.5%.
The regulator also said on Tuesday that the key rate may be hiked again, in the event of increased pro-inflationary risks.