Russia hikes rates to 13% in scramble to lower inflation and prop up the sagging ruble

• Russia's central bank just hiked interest rates to 13% to lower inflation and prop up the ruble.
• Central bankers have raised their inflation forecast for the year to 7.5% well-above the targeted 4%.

Russia's central bank just hiked interest rates again in an urgent bid to quell inflation and support the sagging ruble.

The Bank of Russia raised its benchmark interest rate another 100 basis-points to 13% on Friday, marking its third interest rate hike in a row.

That comes just a few weeks after Russian central bankers delivered an emergency rate hike in August, where they raised interest rates by a steep 350 basis-points to prop up Russia's plummeting ruble.

The ruble traded around 96 against the US dollar on Friday, hovering close to a 16-month low. Meanwhile, Russia's economy ministry raised the nation's inflation forecast for 2023 to 7.5% this week, well-above the target of 4%.

"Significant inflationary risks have crystallised, namely the domestic demand growth outpacing the output expansion capacity and the depreciation of the ruble in the summer months," the Bank of Russia said in a statement Friday morning, reiterating its intention to bring inflation back down to 4% in 2024. That could require tight monetary policy for a "long period," it warned.

Prices accelerated 5.2% during the month of August, per Russia's latest inflation report. Inflation would likely continue to accelerate between 6%-7% through the rest of 2023, before easing back to the 4% clip sometime next year, central bankers said.

Economists have sounded the alarm on Russia's economy, which has been slammed over the past year by western sanctions and its costly invasion of Ukraine. Those stressors could cause Russia's economy to stagnate and grow more dependent on China over time, experts say.