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Russia: rouble at its lowest since 1998

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Russia: rouble at its lowest since 1998

  • Russian rouble hits record low
  • Interest rate cuts likely to be postponed
  • Inflation likely to rise

The news

The Russian rouble has struck a new record low as fresh falls in world oil prices deepened investor worries about Russia’s contracting and oil-dependent economy.

The rouble reached an historic low of 82.29 against the dollar during afternoon trading on Wednesday – the first time this has happened since the 1998 currency crisis.

After a slight rally, it closed down 4.6 percent at 82.16.

What it means for Russia

The rouble’s slide makes it more likely Russia’s central bank will have to postpone the interest rate cuts badly needed to breathe new life into the economy.

In a country where many consumer goods are imported, the drop in the value of the rouble will also push up inflation.

Watchers think this will test support for President Vladimir Putin in a year when Russia holds a parliamentary election.

What they are saying

Many Russian consumers, having spent months already watching the value of the rouble in their pockets fall, have adopted a fatalistic approach to the currency’s decline.

“We are on the verge of going to court,” said one woman outside a bank in Moscow. “I have two small children. None of this is their fault. The last contact I had with the bank was in December 2015 when they suggested I give up my apartment and just go wherever.”

The spectre of negative equity is also haunting Russian property owners.

“My mortgage payment is more than my salary,” said another man. “The situation is now at a stalemate. Even if I hand my apartment back to the bank or manage to sell it, I will still owe them eight million roubles.”

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