Russia's central bank has raised its key interest rate by 100 basis points to 13 percent, marking the third rate hike in two months. The decision comes as Russia grapples with high inflation and a weaker ruble. In recent months, inflation has accelerated, remaining stubbornly high and surpassing the central bank's target of four percent.

The bank cited inflationary pressure in the Russian economy and the depreciation of the ruble as reasons for the rate hike. The central bank also mentioned the possibility of further rate increases in upcoming meetings as it evaluates the feasibility.

Capital Economics expects more rate hikes, as the central bank takes its commitment to fighting inflation seriously and with fiscal policy set to remain loose.

President Vladimir Putin has downplayed the weakening ruble, stating that further research is needed to address the issue. Despite the economic effects of the conflict in Ukraine, Russian officials have largely shrugged off the impact.