Russia's central bank raises interest rate to mammoth 17 per cent
Rouble has now lost half its value in a year
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.A massive overnight rate hike by Russia's Central Bank pushed the rouble 5 per cent higher in early trading on Tuesday, reversing the currency's fall but spelling troubles for the economy ahead.
The rouble traded at 61 per dollar less than an hour into the trading after losing about 10 per cent on Monday in the biggest fall since the 1998 economic meltdown.
The surprise Central Bank announcement to hike the rate to 17 per cent from 10.5 per cent came in the early hours on Tuesday in a desperate move to prop up the trouble currency. It's the biggest interest rate hike since 1998, a year when Russia defaulted on its sovereign bonds.
The move was meant to make it expensive for currency traders to buy roubles and sell them on the market.
The rouble has lost half of its value this year and the decline intensified in the past months by Western sanctions and plunging oil prices.
“With these steps, the Central Bank is looking to bring stability back to the (foreign exchange) market, which has been behaving irrationally over the last few weeks,” Moscow-based investment bank Sberbank-CIB said in a morning note. “This state of affairs required extraordinary measures from the Central Bank - and such measures have now been taken.”The bank, however, added that this step is unlikely to reverse the collapse of the rouble.
The central bank has gradually raised the rate from 5.5 per cent early this year. Last Thursday, it tried unsuccessfully to stem the rouble's slide by boosting its key rate by 1 percentage point to 10.5 percent.
The rate increase, although it can help stabilize the ruble, could spell serious economic troubles ahead, making it more expensive for companies to borrow funds.
Alexei Kudrin, Russia's finance minister in 2000-2011, said on Twitter following the rate hike that “the fall of the rouble and the stock market is not just a reaction to low oil prices and the sanctions but also (a show of) distrust to economic policies of the government.”
AP
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments