MOSCOW — Russia’s central bank hiked its key interest rate by 350 basis points to 12% on Tuesday, an emergency move to try and halt the rouble’s recent slide after a public call from the Kremlin for tighter monetary policy.

The extraordinary rate meeting came after the rouble plummeted past the 100 threshold against the dollar on Monday, dragged down by the impact of Western sanctions on Russia’s balance of trade and as military spending soars.

The rouble pared gains after the decision to stand 0.4% weaker at 98.03 by 0829 GMT, but still significantly above lows near 102 on Monday which had not been hit since the early weeks after Russia invaded Ukraine.

President Vladimir Putin’s economic adviser Maxim Oreshkin on Monday rebuked the central bank, blaming what he called its soft monetary policy for weakening the rouble.

Hours after Mr. Oreshkin’s words, the bank announced the emergency meeting, throwing the currency a lifeline.

“Inflationary pressure is building up,” the bank said in a statement on Tuesday. “The decision is aimed at limiting price stability risks.

“The pass-through of the rouble’s depreciation to prices is gaining momentum and inflation expectations are on the rise.”

Central Bank Governor Elvira Nabiullina has won plaudits for her handling of the economy since Russia began what it calls a “special military operation” in Ukraine, but the plunging rouble and high inflation have put her on the back foot, especially among pro-war nationalists.

The Kremlin’s public criticism of her monetary policy on Monday adds further pressure as Russia heads towards a presidential election in March 2024, with consumers battling rising prices for basic goods.

The bank last made an emergency rate hike in late February 2022 with a rate raise to 20% in the immediate fallout of Russia’s despatching troops to Ukraine. The bank then steadily lowered the cost of borrowing to 7.5% as strong inflation pressure eased in the second half of 2022.

Since its last cut in September 2022, the bank had held rates but steadily increased its hawkish rhetoric, eventually hiking by 100 basis points to 8.5% at its last scheduled meeting in July. The next rate decision is due on Sept. 15.

Russia saw double-digit inflation in 2022 and after a deceleration in the spring of 2023 due to that high base effect, annual inflation is now above the central bank’s 4% target once more and quickening.

In annualized terms on a seasonally adjusted basis, current price growth over the last three months amounted to 7.6% on average, the bank said.

The bank removed its signal that it was ready to raise rates further, said Sovcombank chief analyst Mikhail Vasilyev, interpreting that as a sign that rates have peaked.

“We believe that the key rate will remain at the current 12% level until the end of the year,” Mr. Vasilyev said. “A cycle of key rate cuts is likely as early as next year, when inflation starts to slow down.” — Reuters