One of the roles of the central bank of any country is to monitor and maintain the value of its currency. The bank has a number of methods to do this but one method to attract savings is increase the interest rate. People and institutions will buy the currency and keep it to earn higher rates of interest guaranteed by the government. If it works, the economy is stablizied and eventually the central bank can lower interest rates.

In an article by Alexander Marrow of Reuters, in mid August the Russia Cental Bank hiked interest rates by 3.5% to 12% as the Russian currency the ruble fell in foreign exchange trading.

The reason being the falling price are high government spending on the military and Western govenment’s continuing sanctions on Russian trade.

Timothy Ash, senior EM sovereign stategist at BlueBay Asset Management said as long as the war continues it just gets worse for Russia, the Russian economy and the ruble. Hiking interest rates may slow the decline, but the core problem of the war is still ongoing.

Russia’s widening budget deficits and stark labor shortages have contributed to rising inflationary pressures. (Russia was considered an oil and gas economy and is selling less oil and gas).

Linking to dividend paying stocks, there are always alternatives to invest. As a dividend investor you need to pay attention to the core reasons why you invest in any stock. When that changes it is time to find alternatives.

There are more questions than answers, till the next time – to raising questions.