Drastic step: Russia’s central bank raises interest rates massively – n-tv.de NEWS

Drastic step: Russia's central bank raises interest rates massively – n-tv.de NEWS

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 Tuesday, December 16, 2014

 
 
 

 
 High inflation and ruble crash force the Russian central bank to a draconian measure: you screwed the base rate suddenly sharply upwards – to 17 percent.
 

 

The Russian central bank has massively increased, given the increased depreciation of the ruble the prime rate. He lay on Tuesday at 17 percent, said the central bank. She had raised him until last Thursday to 10.5 percent.

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Neither this step even dollar sales had been able to halt the decline of the ruble exchange rate. On Monday, the Russian currency had continued to lose ground: For a dollar, for the first time had more than 65 rubles will be paid for a euro for the first time more than 78 rubles. Since the beginning of the ruble against the dollar has lost about half of the value of the euro more than 40 percent.

capital flight, the sluggish development of the economy and Western sanctions have the Russian currency driven down steadily. From September, nor the rapidly falling price of oil joined them. Russian officials, including President Vladimir Putin, the collapse of the ruble is seen as a consequence of speculation.

Not only ruble weakness and capital flight speak for a rate hike, inflation is also a reason. In November, the rate was 9.1 percent, which is much higher than that sought by the Federal Reserve. This is also the import ban imposed by the Kremlin of food from the United States and the European Union. Buckwheat was in November by more than 50 percent higher than a year ago, fresh tomatoes cost, according to the statistics agency Rosstat about 35 percent more potatoes 12.6 percent.

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The Fed is in a quandary. Higher interest rates make a currency more attractive in principle, at the same time they fight inflation. However, they slow the economy, as they increase the cost of investment and consumption.

Russia approaches in the face of falling oil prices and a recession Western sanctions, for the coming year, the government expects an economic downturn. It assumes that the gross domestic product will shrink by 0.8 percent. However, this prediction may turn out to be too optimistic: If oil prices remain low, the Russian economy will shrink by nearly five percent next year, the central bank wrote in its quarterly report released Monday on monetary policy. The recent increase in interest rates had not been considered at this time.

  Source: n-tv.de