Country’s economy faces fallout from international sanctions prompted by invasion of Ukraine
- Russia-Ukraine crisis: live news
First published on Mon 28 Feb 2022 03.20 EST
Russia’s central bank has more than doubled interest rates to 20%, and banned foreigners from selling local securities, in a bid to protect its currency and economy in the face of international sanctions over the invasion of Ukraine.
The rate rise, from 9.5%, is aimed to balance the precipitous fall in value of the rouble and surging inflation as the country braces for its financial markets to take battering this week.
Currency trading was due to start later on Monday morning, but other markets were delayed from opening until at least 3pm.
The rouble fell 30% to a record low against the dollar before the intervention, and was down 25% after the move by the central bank.
“External conditions for the Russian economy have drastically changed,” the central bank said in a statement, adding that the rate hike “will ensure a rise in deposit rates to levels needed to compensate for the increased depreciation and inflation risk”.
The central bank has ordered companies to sell 80% of their foreign currency revenues.
Elvira Nabiullina, the governor of Russia’s central bank, was due to speak on Monday afternoon detailing further measures.
The central bank said the measures would “depend on the evaluation of risks from external and internal factors and financial markets’ reaction to them”.
Other steps announced over the weekend include an assurance from the central bank that it would resume buying gold on the domestic market.
Neil Shearing, the group chief economist at Capital Economics, said: “The central bank of Russia has this morning raised interest rates to 20% but other measures (eg limits on deposit withdrawals) are possible later today. All of this will accelerate Russia’s economic downturn – a fall in GDP of 5% now looks likely. Subsidiaries of some Russian banks overseas are likely to come under intense pressure (and may fail), but we judge that these are probably too small to create systemic risks.”
Over the weekend, Vladimir Putin put his nuclear forces on high alert, while on Monday the commander of the Ukrainian forces said Russian troops had been stopped from taking over the capital, Kyiv.
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