The Russian ruble has experienced a notable decline, falling to approximately 96 per USD and approaching new 12-month lows. This downturn is largely driven by a strengthening US dollar, buoyed by solid economic data from the United States. As a result, the odds of a 50 basis point rate cut by the Federal Reserve in November have dropped from 35% to 32%.
In response to the economic challenges, the Bank of Russia has increased its key interest rate by 100 basis points, bringing it to 19% during its Stember meeting. This move indicates a possibility of further rate hikes in October. Additionally, policymakers revised their inflation forecast for Russia to 6.5%-7% for the year, an increase from previous predictions, as inflation currently stands at 9.1%. The rise in inflation is primarily attributed to economic pressures stemming from heightened government military spending, which has inflated wages and surpassed the economy's ability to supply goods and services.
In trading on Monday, October 7, the USDRUB rose by 1.2068 or 1.27% to 96.1944, up from 94.9876 in the prior session. Analysts anticipate the Russian ruble will trade at 96.17 by the close of this quarter, with projections indicating a potential dreciation to 104.66 in the next twelve months.