March–April 2015
Article
Foreign Policy

The Almighty Ruble

Format:Print

Abstract

At 1 AM Moscow time on December 16, Russia's central bank announced a massive hike in the country's interest rate, from 10.5% to 17%. It's not clear how Russian leader Vladimir Putin and his colleagues could realistically have expected to achieve anything by hiking the interest rate. Unless the increase was intended to attract foreign capital—a very unlikely event—it could only have led to higher inflation and greater downward pressure on the ruble. What Russia should do is diversify its economy away from anything that involves extracting resources out of the ground and selling them at volatile, internationally set prices. Until that happens, Russia and its chest-thumping leader will be caught in a cage of their own making, acting symbolically but without any real effect. And the country will remain on the long list of states making policies based on nostalgia rather than sense. Adapted from the source document.