Russia's central bank bids to prop up the plummeting ruble by hiking interest rates to 12% at an emergency meeting

• The Bank of Russia raised interest rates by 350 basis points to 12% at an emergency meeting Tuesday.
• It's trying to prop up the ruble, which plummeted to a 16-month low this week.

Russia's central bank hoisted interest rates to their highest level in over a year Tuesday, after policymakers held an emergency meeting to address the ruble's sudden plunge.

The Bank of Russia said in a statement that it would raise rates by 350 basis points to 12%, lifting borrowing costs to their highest levels since just after Vladimir Putin invaded Ukraine.

It brought in the rate hike after the ruble fell to a 16-month low of nearly 102 to the dollar Monday, leading to Moscow publicly rebuking the central bank.

In an op-ed for the state-owned news agency TASS, Putin's economic advisor Maxim Oreshkin blamed "soft monetary policy" for both "the ruble's weakening" and the "acceleration of inflation," which rose to 4.3% in July.

The Bank of Russia responded to Oreshkin's criticisms by calling an emergency meeting, where it voted to raise interest rates for the second month in a row.

The ruble strengthened in the immediate aftermath of the central bank's decision, climbing around 1% to under 98 to the dollar at just before 5 a.m. Eastern Time.

It's still one of the world's worst-performing currencies in 2023, having plunged around 36% this year, per data from Refinitiv.

The ruble's tumble this year reflects a sharp deterioration in Russia's terms of trade. The nation's current-account surplus collapsed 93% to $5.4 billion in the April-June quarter from a record $76.7 billion in the same period last year.

That showed the heavy blow that Western sanctions — imposed on the Kremlin in response to its war on Ukraine — have dealt to the economy by squeezing its energy exports.