Ruble rushes down

Russia’s central bank raises key interest rates massively

The Russian central bank is reacting to the currency crisis resulting from western sanctions with a drastic interest rate hike. The key interest rate will rise from 9.5 to 20 percent, as the currency watchdogs announced in Moscow on Monday.

At the same time, they signaled their readiness for further increases. Central bank chief Elvira Nabiullina wants to explain the measures during the day at a press conference.

Russia’s escalating conflict with the West following its invasion of Ukraine caused the country’s currency to plummet. Conversely, the dollar temporarily rose almost 42 percent on Monday to a record high of 119 rubles.

Higher interest rates can help stabilize the exchange rate and also curb inflation, but they also make loans more expensive – for investments, for example. Local companies should also sell 80 percent of their foreign exchange earnings, announced the central bank and the Ministry of Finance.

In addition, the sanctions have triggered panic selling in Russia’s bonds. The papers with terms up to 2024 and 2043 each lose more than 50 percent in value.

According to information from Brussels and Berlin, the EU put into effect the announced serious sanctions against the Russian central bank during the night. They include a ban on transactions by the bank in relation to Russia’s large currency reserves in euros.

In addition, the assets of the bank in the EU are confiscated. Chancellery State Secretary Jörg Kukies announced in a tweet that the United States would take similar steps.