Whenever we have a discussion about the Russian Central Bank’s defense of the ruble, it’s hard not to talk about the political backlash that could come along with the inflation, something we have already begun to see with the public discontent over the handling of the economy (which frankly could be happening in any country, but in one with so few pressure release valves, the government looks more threatened).  Given that on Jan. 22 we saw the currency nearly breakthrough the floor of the targeted value, we are seeing an increasingly precarious situation for the monetary authorities – one that cannot easily be solved by truncheon-wielding OMON sent to dispatch the rowdy crowds.  From the Financial Times:

The bank indicated it would defend this level unless oil prices fell to $30 a barrel. With Urals blend still around $43, the rouble’s value currently looks in the right ballpark. The trouble is that currencies tend to overshoot as they decline. Forward markets are pricing the rouble 18 per cent lower against the dollar in 12 months. And the bank’s ammunition is running short.