The Russian stock market's performance has been a rollercoaster since the full-scale invasion of Ukraine, mirroring the country's economic struggles. The Moscow Exchange Index, a key indicator, has plummeted 30% in three months, reaching its lowest point since the war's start. This decline is a stark contrast to the optimism expressed by Putin, highlighting the market's rejection of his predictions. The index's fall is a result of various factors, including higher taxes, property confiscations, falling investment, war damage, and high interest rates. The market's reaction is a clear signal that these policies are not working as intended.
The article delves into the stages of war grief, showcasing the Central Bank's monetary policy swings. Initially, the bank raised the key rate to combat inflation, which was justified by rising prices. However, this stage was short-lived due to the economy's decline and the departure of foreign investors. The second stage saw a rapid rate cut, leading to optimism and a temporary stock market recovery. But the renewed fear of inflation in 2023-2024 led to another rate hike, causing another stock market plunge.
The author argues that the current situation is a result of the bank's attempts to stimulate the economy, which are now close to exhausting their potential. The market's decline is expected to continue, with further rate cuts unlikely to prevent stagflation. The article concludes by questioning the bank's mandate and the Kremlin's role in shaping the country's economic trajectory, emphasizing the need for a more aggressive anti-inflationary policy to address the current crisis.
