Response to sanctions: Russian central bank raises key interest rate – ruble collapses

The measure is a response to the West’s severe economic sanctions against Russia. The ruble is under pressure – the Russian central bank is trying to calm down.

The Russian central bank has reacted to the financial sanctions imposed by the West in the wake of the Ukraine war by raising interest rates. The central bank announced that the key interest rate would rise by 10.5 points to 20 percent.

External economic conditions had changed drastically. The higher interest rates are intended to counteract the risk of the devaluation of the ruble and the risk of inflation.

In the morning, the ruble lost about eight percent against the dollar. In return, a dollar cost around 90 rubles as much as never before. In the so-called offshore trade outside of Russia the national currency had plummeted even more.

Russia prohibits foreigners from selling securities

The Ministry of Finance also introduced an obligation for companies to sell part of their proceeds in foreign currency. The measure should also aim to limit a fall in the ruble.

The central bank had already taken further measures to support the financial system in the morning. Securities dealers were prohibited from selling Russian securities owned by foreigners. Domestic financial institutions are also to be supported with capital injections and foreign currency transactions.

Central Bank: Sufficient liquidity there

The EU put its sanctions against the Russian central bank into effect on Monday night. The punitive measure is considered to be just as serious as the shortly planned exclusion of some Russian financial institutions from the banking communications network Swift.

Russia’s central bank had already pledged support to domestic banks on Sunday in view of the imminent exclusion from Swift. There is sufficient capital and liquidity for uninterrupted functioning in any given situation, the bank said.

© dpa-infocom, dpa:220228-99-317784/3 (dpa)

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