Russia’s economic problems simply no longer Lord. As the capital outflows continue, the value of the ruble continues to be forfeited and inflation is rampant in the country, attacked the central bank in Moscow in the early hours of Tuesday to a desperate means: In a surprise move it raised its key interest rate by 6.5 points to 17 percent to the attractiveness of the to increase the domestic currency.
observers see this as a panic reaction. Just a few hours after the opening of the markets of the huge rate hike fizzled again: After initial gains of the Russian ruble currency plummeted. He lost until Tuesday afternoon by 20 percent in value. For the first time had to be paid 80 rubles to the dollar and 100 rubles for one euro. Since the beginning of the ruble has lost nearly 60 percent of its value.
Economists advise on further actions
For the already ailing economy of Russia the interest rate jump is a shock, because higher interest rates on private consumption and business investment are likely additional burden. “The pressure from the markets could prompt the central bank to raise interest rates further,” commented economists at Commerzbank. The Central Bank of Russia (CBR) has “finally reacted decisively.” You expect the Russians to take further action in the coming days. “This is in our view a first of many possible steps that can take the CBR to slow the ruble devaluation and bring about a recovery.”
The pressure of markets may CBR to a further rate hike cause guess the experts. “In addition, we would expect that the central bank will intervene with a significant amount of the currency market to support the ruble.” Was appropriate an amount between five and ten billion dollars “in one fell swoop.”
risks for European banks
The Commerzbank economists point out that the ruble turbulence far from a local problem of Russians: “The main objective shall edarin exist to curb extreme and dangerous for the stability of financial markets volatility in the ruble The central banks in Western Europe should have a strong interest in ensuring that the turbulence in rubles calm, as the European one. banking system is heavily involved in Russia. “
Since the beginning of the ruble has lost more than 40 percent of its value in the past three months alone 37 percent. The main causes are the economic sanctions imposed by the West for Ukraine crisis and the fall in crude oil prices. Since this summer, oil prices have fallen by almost 50 percent. The economy and the state budget of Russia are dependent on high revenue from oil exports
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