Russian central bank hikes key interest rate
A woman walks past a board showing currency exchange rates of the US dollar and the euro against Russian ruble in Moscow.
Russia's central bank more than doubled its key policy rate yesterday and unveiled some capital controls as it scrambled to shield the economy from unprecedented Western sanctions that sent the rouble tumbling to record lows.
The main interest rate will rise to 20 percent, its highest this century, from 9.5 percent to counter the risks of the rouble's rapid depreciation and higher inflation, which threaten Russians' savings.
"External conditions for the Russian economy have drastically changed," the central bank said, adding that the hike "will ensure a rise in deposit rates to levels needed to compensate for the increased depreciation and inflation risk.
The monetary authority also ordered companies to sell 80 percent of their foreign currency revenues, increased the range of securities that can be used as collateral to get loans and temporarily banned Russian brokers from selling securities held by foreigners. It did not specify which securities the ban applies to.
The emergency measures put the central bank on the frontline of defending Russia against a campaign by Western allies to isolate it economically.
The central bank has itself been targeted, with the West seeking to restrict its ability to deploy US$640 billion of forex and gold reserves and cut Russia's major banks off the SWIFT financial network, making it hard for lenders and companies to make and receive payments.
The rouble plunged nearly 30 percent to an all-time low versus the US dollar yesterday. The stock market and derivatives market remained closed.
Yesterday's steps by the central bank bolster other measures announced on Sunday, including an assurance that the bank would resume buying gold on the domestic market. It will also launch a repurchase auction with no limits and ease restrictions on banks' open foreign currency positions.
Finance Minister Anton Siluanov said that the government was ready to strengthen commercial banks' capital base if required.
Russians queued outside ATMs on Sunday, worried the sanctions could trigger cash shortages and disrupt normal life.
