🔥 Land A High Paying Web3 Job In 90 Days LEARN MORE

Russia scrambles to contain ruble crash with central bank intervention

In this post:

  • The ruble tanked hard, hitting 114 against the dollar, and the central bank had to step in to stop things from getting worse.
  • Prices in Russia are insane right now—food costs like butter and potatoes are through the roof, and inflation is out of control even with crazy-high interest rates at 21%.
  • New U.S. sanctions on Gazprombank are making it almost impossible for Russia to trade in dollars or keep its economy running smoothly.

Russia’s economy is taking punches it can’t dodge, with the ruble nosediving to its lowest point in over two years.

On Wednesday, the currency crashed to 114 against the U.S. dollar—levels unseen since the early days of Moscow’s invasion of Ukraine. In a desperate move, the Central Bank of Russia (CBR) intervened, halting all foreign currency purchases for the rest of 2024.

This was a full-blown panic button press, and by Thursday morning, the ruble inched up to 110. President Vladimir Putin, cool as ever, dismissed the crisis, saying there was “no need for panic.” He blamed the ruble’s slide on seasonal factors, budget payments, and fluctuating oil prices.

“In my opinion, the situation is under control, and there are absolutely no grounds for panic,” he said. Kremlin spokesperson Dmitry Peskov shares the sentiment, insisting that the ruble’s collapse wouldn’t affect ordinary Russians since their salaries are paid in rubles.

What the numbers show

Experts aren’t buying the Kremlin’s confidence. A weaker ruble equals higher inflation, forcing the central bank to raise interest rates even more, which will choke Russia’s already sputtering economy. It’s ECONS 101.

The central bank is already drowning in this disaster. Interest rates are at a brutal 21%, but inflation isn’t playing along. October saw an annual inflation rate of 8.5%, with food prices spiraling out of control. Butter, potatoes, and other essentials now come with jaw-dropping price tags.

See also  Russia's economy might've never been as strong as it seemed

The government is pointing fingers at sanctions from the U.S. and its allies, accusing “unfriendly countries” of wrecking the Russian economy. But sanctions are just one piece of the puzzle.

New U.S. sanctions targeting Gazprombank, the Kremlin’s third-largest bank, are adding gasoline to the fire. These measures cut Gazprombank out of any energy-related transactions involving the U.S. financial system.

A wartime economy struggles

Russia’s economy is a war machine running on fumes. The Kremlin has been funneling resources into defense spending and weapons production, cranking out tanks and artillery at the expense of consumer goods.

Despite this, Putin denies the obvious trade-off. He rejects the idea that Russia is swapping “butter for guns,” but the numbers tell a different story.

Wage growth can’t keep up, and production costs are through the roof. Still, the Kremlin clings to its propaganda, blaming external factors instead of admitting internal chaos.

Surprisingly, Russia’s economy managed to grow this year. The International Monetary Fund (IMF) revised its forecast, projecting a 3.6% GDP increase, largely due to oil and gas exports. A handful of nations continue buying Russian energy, keeping the Kremlin’s coffers from completely drying up.

But this short-term growth is a mirage. The IMF warns that GDP growth will plummet to 1.3% in 2025, citing slowing private consumption and reduced investment. In simple terms: the war machine can’t run forever without draining the tank.

See also  Wall Street’s Trump rally propels global stocks to May-level highs

Maxim Reshetnikov, Russia’s Economic Development Minister, also dismissed concerns, claiming the currency’s decline is driven by the dollar’s global strength and “emotional” reactions to sanctions. He assured reporters that Russia’s trade balance remains strong, despite the chaos.

But the cracks are impossible to ignore. Labor shortages, high defense spending, and supply chain issues are choking the economy. Inflation is squeezing ordinary Russians, and black-market prices are soaring. The ruble’s volatility may stabilize temporarily, but the underlying issues aren’t going anywhere.

Land a High-Paying Web3 Job in 90 Days: The Ultimate Roadmap

Share link:

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

Most read

Loading Most Read articles...

Stay on top of crypto news, get daily updates in your inbox

Editor's choice

Loading Editor's Choice articles...
Cryptopolitan
Subscribe to CryptoPolitan