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Not even Fed chair Jay Powell can be accused of ever moving that far this fast. 

In an emergency meeting on Tuesday, Russia's central bank governing board
decided to increase interest rates by 3.5 percentage points, reaching 12%. This
action aims to prop up the ruble, which has been significantly impacted by
Western sanctions in response to the conflict in Ukraine.

“This decision is aimed at limiting price stability risk,” it said in a
statement, justifying its second hike in less than a month by citing
“substantial” upside risks to inflation from the collapsing currency.

Just four days prior, a deputy governor had dismissed concerns around the
exchange rate in comments to the state news agency TASS. 

The move comes after the country’s ruble broke below the psychological floor of
100 to a U.S. dollar, rendering each less valuable than a penny. 

The currency has now surrendered all of its gains from last year to plumb depths
not seen since an investor panic in the early days of the war. 

Pressure on the bank subsequently rose to a fever pitch, with Kremlin mouthpiece
and Putin ally Vladimir Solovyov demanding on his Russian state TV show that the
central bank takes action. 




Prior to the February 2022 invasion of Ukraine, Putin’s industry had long been
dependent on the West. In exchange for selling commodities like food, energy and
base metals such as nickel, Russia could purchase the machinery and equipment it
needed to run its factories.



Western sanctions however have crippled manufacturers’ ability to provide for
their consumers by limiting access to key intermediates including microchips
that could help them expand their output.

In its statement on Tuesday, the bank blamed consumers forced to increasingly
look abroad in order to satisfy their demand for finished goods.

This exerted heavy downward pressure on the ruble and threatened the central
bank's price stability target of 4% as imported inflation is now spilling over
into the broader economy.

Raising the main policy rate to 12% from a previous 8.5% so soon after a July
hike is a tacit admission that the bank’s most recent 100 basis point move less
than four weeks ago was far from sufficient to put a floor under the ruble. 

Even when Fed chair Powell was in full-blown inflation-fighting mode, he only
hiked at a pace of 75 bp during four consecutive meetings stretching across a
six-month timeframe.

This story was originally featured on Fortune.com

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A civilian cargo ship sailed through a “new humanitarian corridor” out of Odesa,
according to Ukrainian President Volodymyr Zelensky, a milestone defiance of
Russia’s blockade of Ukrainian port cities.

“Ukraine has just made an important step toward restoring the freedom of
navigation in the Black Sea,” Zelensky posted on X, the social media platform
formerly known as Twitter. “The first civilian vessel has passed through
Ukraine’s new humanitarian corridor, departing from the port of Odesa. It’s
currently on its way to the Bosporus.”

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That voyage represents the first passage out of a Ukrainian port since Russian
President Vladimir Putin scuttled the Black Sea Grain Initiative, a United
Nations-brokered deal allowing the export of Ukraine’s vast food stores to
global markets. Russian officials have reveled in raising the global cost of the
war by restricting Ukrainian food supplies, but the departure of the Hong
Kong-flagged cargo ship may call into question their enforcement of the
blockade.



“The good thing is that grain deal seems to work without Russia,” Ukrainian
Foreign Affairs Committee Chairman Oleksandr Merezhko wrote in a message to the
Washington Examiner. “Maybe the pressure on it was so serious that Russia
doesn’t risk to attack Ukrainian ships anymore.”



The immediate implications for the grain exports, for now, are largely symbolic.
Secretary of State Antony Blinken and other U.S. officials have questioned
whether international transportation companies and insurance companies would be
willing to take the risk of traveling to and from the Ukrainian ports without
Russian security guarantees, but regular departures from Ukrainian ports could
embolden the export industry.

“The value is to show that Russia is not almighty and they are not controlling
the situation on the Black Sea,” a senior European official said. “It’s also
showing of course, others also, that it’s possible. But still, the risks are
high.”

The ship that departed on Wednesday, named Joseph Schulte, has been trapped in
Odesa since Putin launched the campaign to overthrow the Ukrainian government on
Feb. 24, 2022.




“This transport corridor will be primarily used to evacuate ships that were in
[Ukrainian] ports at the time of the full-scale invasion of the Russia,”
Ukrainian Infrastructure Minister Oleksandr Kubrakov posted on X.



Russian authorities have not abandoned their intent to keep Ukrainian food
supplies off global shelves. On Wednesday, Russian forces bombarded a pair of
Ukrainian ports near the Romanian border in an apparent attempt to crimp a
Danube River route that offers the hope of getting Ukrainian grain into
NATO-territories waters.

“This escalation demonstrates [that] Moscow continues to prevent grain and
foodstuffs from reaching those who need it most throughout the world,” State
Department deputy spokesman Vedant Patel said Wednesday. “Our Ukrainian partners
are inspiring the world while Russia starves it by weaponizing food.”

NATO allies are trying to help alleviate that pressure within the limits set by
trans-Atlantic hesitance to mount a direct challenge to the Russian blockade.



“NATO Allies that have coastal borders have deployed ships to find and
neutralize mines in the Black Sea, in order to protect human lives, as well as
commercial shipping," NATO spokeswoman Oana Lungescu said Wednesday afternoon.

CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER

Russian leaders have talked openly of their intent to undermine international
support for Ukraine by blockading Ukrainian food exports while making their own
deliveries to their “friends” in the world. Russian Security Council Deputy
Chairman Dmitry Medvedev characterized food as a “quiet weapon” while outlining
this strategy last year, and Russian forces have targeted Ukrainian grain and
agricultural infrastructure inside Ukraine.

"A safe sea for all," Zelensky posted. "This is Ukraine's and our partners'
principled stance. Freedom and safety of navigation are fundamental
international principles."

Tags: War in Ukraine, News, Foreign Policy, National Security, Russia

Original Author: Joel Gehrke

Original Location: Cargo ship runs Russia's blockade of Ukraine's ports




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