Recent interest rates hike in Russia in order to fight the growing inflation, which is a global issue currently faced by the majority of the world's countries due to the COVID pandemic which has highly burdened the global market. As labor shortages have increased in the country accompanied by massive geopolitical tensions, Russia has warned despite a 100 basis point hike in interest rates that monetary tightening is not halting at this point. The central bank has increased, for the seventh time, the key rate to a level of 8.5 percent, which was expected regarding their policy. The governor of the bank of Russia has claimed that the chances of more hikes are lower than before but the possibilities still exist due to the unstable economic condition as inflation runs at double the central bank’s target. The President of the country himself has stepped in and ordered the price growth back in line. Although the pressure from the labor market has increased, the aim is to get inflation back to 4-4.5 percent. The ruble has benefited from the central bank’s tight policies and has only traded down 0.2 percent against the US dollar. Economists assure that while inflation looks to set slow due to the efforts, the central bank is still monitoring the situation and it could possibly be the last hike of the cycle. Geopolitical tensions due to the border issues with Ukraine carry a threat of penalties from the US and Europe which could potentially increase the volatility of the financial markets.
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