There’s trouble in paradise, and by “paradise”, I mean Russia.
The ruble came under all manner of pressure on Thursday following comments from Prime Minister Dmitry Medvedev, who decided it was a good idea to say the following at a conference in Moscow:
It’s necessary to move from neutral to stimulating oversight of the credit sphere to create conditions for more confident economic growth. Interest rates remain quite high despite the successes in holding back inflation.
He went on to advise the central bank to be “active” when it comes to addressing high-interest rates.
Suffice to say that implicit encroachment on central bank independence is not exactly what the market wants to hear at a time when EM is under all manner of pressure. The ruble fell sharply when Medvedev’s comments hit the tape.
(Bloomberg)
That’s the weakest the ruble has been against the greenback since March of 2016. The currency was the fourth-worst performer in EM last month.
(Bloomberg)
“It seems that the market has interpreted comments from PM Medvedev as political interference in the monetary policy”, Rabobank’s Piotr Matys said Thursday, adding that “such remarks may undermine the credibility of the central bank and Governor Nabiullina, who is well respected by investors for acting decisively during the ruble crisis only a few years ago”.
On Tuesday, Nabiullina suggested a rate hike is indeed on the table, saying the following in Sochi:
There’re a significant number of factors for holding the rate and some factors have appeared that allow to put the option of a possible rate increase on the table. We’ll assess all the risks.
This comes as the U.S., the U.K., France, Germany, and Canada released a joint statement faulting the Kremlin for the Skripal poisoning. This week, the U.K. charged two would-be assassins in the incident. The two men have been identified as Russian military foreign intelligence service operatives. Of course, Maria Zakharova (Sergei Lavrov’s swaggering spokeswoman), doesn’t know anything about the two suspects. “The names, as well as the photos, published in the media, mean nothing to us,” she said on Wednesday.
