Coupled with fresh falls in world oil prices, investor concerns deepen.
- Russian rouble hits record low
- Interest rate cuts likely to be postponed
- Inflation likely to rise
The news
ADVERTISEMENTThe 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.
Russian ruble hits all-time low against dollar, oil prices strike fresh 12-year lows https://t.co/2jlxchv25cpic.twitter.com/YH8iBk10nL
— AFP news agency (@AFP) January 20, 2016
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
Oil slump sends Russian ruble to all-time low https://t.co/iG7eUC0u9qpic.twitter.com/R0eBLibbGI
— Reuters India (@ReutersIndia) January 20, 2016
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
Russian ruble, battered by weak oil prices, drops to new low and breaks an all-time record
https://t.co/qM6×5m4dC4pic.twitter.com/06JvRgL7bc— DAILY SABAH (@DailySabah) January 18, 2016
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.”