How will a weak dollar affect the key interest rate in the Russian Federation? Answers to the main questions

The introduction of new duties by US President Donald Trump has collapsed the dollar to the maximum in two years. Against the background of the strengthening of the ruble, the average annual key rate in 2025 is projected in the range of 19-22%, and at the lower limit. Izvestia investigated why Washington benefits from a weak dollar and what will happen to the Central Bank's rate and the ruble.

Why does Trump benefit from a weak dollar?

• A weak dollar may be beneficial to Trump, since in fact it acts as an alternative to customs duties or even as an addition to them. This means additional trade preferences for American manufacturers. The weaker the dollar, the less profitable imports from China, the EU, and other U.S. trading partners become. In this case, in order to maintain a share in the American market, European and Chinese companies will be forced to lower prices and give up part of the profits.

• A weak dollar may also prompt the ECB and the People's Bank of China, and then other central banks, to start reducing transaction rates in order to prevent national currencies from strengthening against the dollar. Thus, trade wars can be complemented by currency wars.

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• Trump openly declares his goal to lower the dollar exchange rate. A weaker dollar will support the exports of American manufacturers, as their products will become more competitive in global markets. The depreciation of the dollar can reduce the problem of US government debt. In addition, the weakening of the currency may give an advantage to the American economy in the context of a trade war, which Trump has embarked on.

• However, it will not be possible to solve all the problems of the American economy at the expense of a weak dollar. The price will be higher inflation, and one can only guess how ordinary Americans, who are used to cheap imports, will react to this. Such actions by Trump will strengthen the processes of de-dollarization in international settlements. And this deprives the United States of many "privileges" in the long run.

• In addition, a weak dollar will contribute to higher oil prices. Trump is trying to give a powerful boost to the American economy, but at the same time affects the interests of consumers. It should also be borne in mind that the positive effect of a weak dollar will not be immediately visible, but consumers in the United States will feel inflation relatively quickly.

How much can the ruble strengthen?

• The ruble exchange rate is influenced by such factors as the Central Bank's key rate, inflationary processes, the size of the trade surplus, the currency structure of settlements, the ratio of supply and demand in the foreign exchange market, oil prices, the dynamics of budget expenditures and revenues, as well as political events.

• In the current circumstances, foreign policy events are the most powerful factor. In addition, prices in the oil market have recently gone down. Recently, there were reports that the Bank of Russia warned the Russian government about the danger of a prolonged decline in oil prices. President Trump's decision to impose import duties only contributes to this process.

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• The high exchange rate of the ruble reduces the prices of imported goods, contributing to a decrease in consumer inflation. A strong ruble also makes foreign tourism cheaper for Russian citizens. In general, this increases public confidence in the national currency, which has a positive effect on economic processes.

• However, a strong ruble reduces ruble revenues to the budget and negatively affects the trade balance. In fact, the oil and gas revenues received in March were 65.6 billion rubles less than the forecast value. At the moment, the Bank of Russia is pursuing a fairly balanced and reasonable monetary policy, in which the changing ruble exchange rate balances the conflicting interests of economic entities.

• The long-term consequences of the strengthening of the national currency carry significant risks associated with a high budget deficit due to a shortfall in planned export revenues. And not only mineral resources, but also, for example, products of mechanical engineering or agriculture.

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• A long-term strengthening of the ruble is possible only in the case of a significant improvement in the geopolitical situation, which will pave the way for significant capital inflows (including the "suspended" Russian currency). However, the ruble is expected to weaken in the future. In previous periods, the ruble strengthened strongly at the beginning of the year and fell by December. The weakening process may traditionally begin in August.

How will the Central Bank's rate change?

• There is no direct relationship between the Central Bank's rate and the ruble exchange rate. But indirectly, the high rate strengthens the ruble, as it becomes more profitable to save in rubles rather than spend or buy foreign currency. A strong ruble reduces inflation and economic activity. Therefore, all other things being equal, the higher the rate, the stronger the ruble. However, the stronger the ruble, the easier it is to lower the rate.

• With a high key interest rate, loans become more expensive and inflation decreases. At the same time, rates on deposits and bonds are rising. Thus, the attractiveness of these ruble-denominated instruments for investors is also growing. The ruble is becoming more in demand, there is less of it in the foreign exchange market, and it is strengthening. When the key rate decreases, the ruble, on the contrary, becomes more accessible — investors begin to get rid of it, buy other growing currencies, and the ruble exchange rate decreases.

• Last year, the Bank of Russia raised the rate to a record 21% for Russian realities. This situation should have caused a massive influx of foreign capital. But this does not happen, as this mechanism is weak in the Russian economy under sanctions. However, foreign capital still finds some ways to circumvent the sanctions. Therefore, the Ministry of Finance of the Russian Federation records a small but increased influx of "cowboy money" into Russia. In other words, Western investments come to our country, bypassing sanctions. According to the Ministry of Finance, this happens through friendly jurisdictions.

What will happen next?

• According to the most likely scenario, against the background of lower inflation and inflation expectations, which will be helped by a strong ruble at the moment, the Central Bank will begin to lower the rate in the third quarter of this year. At the same time, the ruble will go down. At the end of the year, we can expect a rate of 18%. Also, the most likely scenario is considered to be a return of the ruble to 93-95 paired with the dollar.

• The current strengthening of the ruble is a temporary phenomenon. It creates a certain amount of room for maneuver, but it does not solve the structural problems of the economy. The main challenge for the authorities is to find a balance between maintaining the exchange rate and stimulating growth, while preventing a new round of inflation.

• In the medium term, we also need to be prepared for a fall in the ruble exchange rate and for annual inflation to exceed 10%. The main task is to prevent a precipitous fall in the ruble exchange rate or a sharp increase in inflation when it becomes uncontrollable.

When writing the material, Izvestia interviewed:

• Anton Tabakh, Chief Economist at Expert RA rating agency;
• Dmitry Alexandrov, Head of the Analytical Research Department at AVI Capital;
• Compare Alexey Lossan as an expert of the company;
• Oleg Akimov, Associate Professor of the Department of Banking and Entrepreneurship at GUU;
• Candidate of Historical Sciences, Associate Professor of the Department of National Economics of the Presidential Academy Vladimir Lyubetsky;
• Dmitry Kvasha, an expert in the field of bankruptcy.