The central bank in Russia intervenes to stop panic over the falling ruble.

• The central bank in Russia has suspended the ruble to prevent panic over its sharp fall this week, as the Kremlin has labeled the situation as unnecessary.
• The ruble has reached its lowest level against the greenback since March 2022, following Russia's invasion of Ukraine.
• On Wednesday, the central bank of Russia intervened to support its struggling currency.

The central bank intervened to support the ruble on Wednesday in an effort to quell panic over its sharp decline this week.

On Wednesday, the Canadian dollar weakened to 114 against the greenback, reaching its lowest level since March 2022, just after Russia invaded Ukraine.

The CBR intervened to stabilize the ruble by halting foreign purchases on the domestic currency market for the remainder of the year.

On Thursday morning, the ruble was trading at 110 against the dollar after the intervention.

Earlier, Russian President Vladimir Putin stated that there was no need to worry about the ruble's depreciation, as it was influenced by budget payments and seasonal fluctuations.

Putin stated that in his view, the situation is under control and there is no reason for panic, according to RIA Novosti.

The ruble exchange rate fluctuations are linked to inflation, budget payments, and oil prices, as well as seasonal factors, according to the speaker.

Dmitry Peskov, the Kremlin spokesman, stated that the decline wouldn't affect ordinary Russians as they receive their salaries in rubles, according to a report from Russian media.

According to experts, the declining ruble indicates a rapidly worsening economic outlook for Moscow.

According to Timothy Ash, an emerging markets strategist at BlueBay Asset Management, there is a potential currency crisis brewing in Russia as the ruble is currently in free fall.

Higher inflation, higher CBR policy rates, and lower real GDP growth are the consequences of a weaker ruble, according to Ash's emailed comments.

The collapse of the ruble can be partly linked to the recent U.S. sanctions against Russia's Gazprombank, as well as the war-oriented domestic economy that has led to a surge in inflation.

Despite the central bank raising interest rates to 21%, inflation remains rampant, with an 8.5% rate in October and a significant increase in the prices of basic foods like butter and potatoes over the past year.

The government has attributed the high cost of living to sanctions imposed on Russia by "unfriendly" countries, while the conflict has resulted in labor and supply shortages and increased wage and production costs.

President Putin has denied trading "butter for guns" amid rising price pressures, increased defense spending, and increased domestic weapons production.

Despite the ongoing war, Russia's economy has continued to expand, mainly due to its oil and gas exports to countries that have chosen to ignore the conflict. The International Monetary Fund has revised its GDP forecast for Russia in its latest economic report, predicting a growth rate of 3.6% in 2024.

The report predicted a slowdown in economic growth, with a projected 1.3% increase in 2025. This was attributed to a decline in private consumption and investment, as well as reduced labor market tightness and slower wage growth.

'Crisis in the making'

The Biden administration is intensifying efforts to pressure the Kremlin as the ruble's value continues to decline before President-elect Trump takes office in January.

The recent sanctions imposed on Russia's third-largest bank, Gazprombank, have caused significant pain for the country, as they prohibit the financial institution from engaging in any energy-related transactions involving the U.S. financial system. Additionally, the U.S. Treasury has accused the bank of being a tool for Russia to acquire military equipment for its conflict with Ukraine and to compensate its soldiers.

The White House had previously been hesitant to sanction the bank due to its use in receiving payments from European buyers of Russian natural gas, but many of these consumers have since reduced their Russian gas purchases since the war began.

Russia is facing tighter sanctions, including those on the Moscow stock exchange MOEX, OFAC's crackdown on secondary sanctions, and Gazprombank sanctions. As a result, it is becoming increasingly difficult for Russia to engage in foreign trade, according to BlueBay Asset Management's Ash.

The war and Western sanctions against Russia for its invasion are having a significant impact, according to economists.

According to Joseph Brusuelas, chief economist at RSM US, two years of sanctions are causing damage to the Russian economy, as evidenced by the ruble's further decline on Wednesday.

Russia's economy is facing challenges as it struggles to support its war effort and exhausts its resources, according to comments posted on X. The central bank has run out of unorthodox steps to avoid the inevitable endgame, which began today with the stoppage of buying foreign currencies.

"The central bank has halted foreign FX purchases until the end of the year in an effort to stabilize financial markets. The ruble has fallen 35% since August due to inflation and the Kremlin's decision to prioritize military spending over economic development. Observers should monitor the situation closely as inflation continues to rise and the black market reveals a stark contrast between the government's official narrative and the reality of a struggling economy on the brink of collapse."

Russian officials have swiftly dismissed the ruble's dramatic depreciation and attributed it to sanctions.

On Wednesday, Russia's Economic Development ministry head, Maxim Reshetnikov, stated that the ruble exchange rate was not influenced by "fundamental factors."

According to Interfax, he stated that the current weakening of the exchange rate is not due to fundamental factors, as the trade balance is strong.

"The strengthening of the dollar against world currencies and the tightening of sanctions against the Russian Federation are the main factors weakening the economy, according to the speaker. Additionally, there is currently an emotional component on the currency market, which often leads to increased volatility. However, experience shows that after a period of instability, the rate always stabilizes."