Russia's rouble plunges to lowest rate since early weeks of Ukraine war

Russia's rouble has fallen to its lowest value against the US dollar since the early days of the Ukraine war, reaching 110 roubles per dollar. This decline follows new US sanctions against Gazprombank, a major player in processing payments for Russian gas exports. The sanctions are expected to further diminish Russia's gas revenues, exacerbating the country's existing inflation issues, which could rise to 8.5% this year. The Central Bank has responded by raising interest rates to 21%, the highest in over two decades. Despite these challenges, Russia's finance minister indicated that a weaker rouble could benefit exporters, suggesting that the government may allow the currency to slide further. The economy is showing signs of stagflation, with low growth and high inflation, particularly as military spending consumes a significant portion of the budget. Analysts note that while military-related sectors are experiencing growth, other areas of the economy are stagnating. The overall economic resilience of Russia has been surprising to some Western officials, but concerns about long-term sustainability amid rising military expenditures and labor shortages persist.

- The rouble has dropped to 110 against the dollar, its lowest since March 2022.

- New US sanctions on Gazprombank are expected to reduce Russia's gas revenues.

- Inflation in Russia could reach 8.5% this year, prompting a rise in interest rates to 21%.

- The Russian economy is showing signs of stagflation, with military spending dominating the budget.

- Growth is primarily seen in military-related sectors, while other sectors are stagnating.