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Russian economy: Ruble collapses as central bank doubles a key interest rate
Russia's ruble collapsed on Monday as sanctions hit, forcing President Vladimir
Putin to hold an emergency meeting with his economic advisers.
BUSINESS
RUSSIA'S CENTRAL BANK DOUBLES A KEY INTEREST RATE AS SANCTIONS SPARK ECONOMIC
TURMOIL
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February 28, 20221:37 PM ET
Bill Chappell
Twitter
Enlarge this image
Russian President Vladimir Putin chairs a meeting on economic issues at the
Kremlin on Monday as the ruble fell and Russia's central bank raised its key
interest rate to a historic high. Alexey Nikolsky/Sputnik/AFP via Getty Images
hide caption
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Alexey Nikolsky/Sputnik/AFP via Getty Images
Russian President Vladimir Putin chairs a meeting on economic issues at the
Kremlin on Monday as the ruble fell and Russia's central bank raised its key
interest rate to a historic high.
Alexey Nikolsky/Sputnik/AFP via Getty Images
Russia's central bank more than doubled its key interest rate to 20%, and the
ruble fell to a record low on Monday, after a weekend that brought strict new
economic sanctions from the U.S. and the European Union. The punishments for
Russian President Vladimir Putin's decision to mount a full-scale invasion of
Ukraine are now hobbling Russia's economy.
The Central Bank of Russia is grasping for ways to prop up the ruble. It last
raised its key rate two weeks ago, to 9.5%.
"External conditions for the Russian economy have drastically changed," the
central bank said, citing high inflation risks and volatility as it raised the
rate.
Regulators kept the stock market closed Monday to limit the turmoil. The stock
market reportedly will remain closed on Tuesday.
The economic predicament is the latest sign that Russia's military attack is
sparking one of the country's worst financial crises since the Soviet era.
The central bank's 20% rate is an all-time high, according to state-run TASS
media.
Russia is now under severe sanctions, with certain banks cut off from SWIFT, the
global system that is vital for banks to carry out secure transactions. In
addition to that extraordinary move, a large chunk of Russia's international
currency reserves — estimated in the hundreds of billions of dollars — has been
frozen by Western authorities.
The key rate has surpassed the heights it hit the last time Russia came under
widespread economic pressure, following its illegal annexation of Crimea in
2014. The ruble's sharp loss in value echoes that same period, as well as the
financial crisis of the late 1990s.
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The ruble's steep fall has raised fears of a run on Russia's banks.
"In frantic trading when markets opened on Monday the ruble collapsed by at
least 20%, passing the 100-mark against the U.S. dollar," The Moscow Times
reports. "Banks and exchange outlets around the capital were charging much
higher rates for hard currency."
The sanctions and instability forced Putin to hold an emergency meeting with his
economic advisers on Monday. Afterward, he signed a decree to counter what he
called the unfriendly and illegal actions of the U.S. and its allies, according
to TASS. Details of those measures weren't immediately disclosed; the Kremlin's
main website, where the decree was published, has been unavailable for much of
Monday.
Russia's central bank insists that its financial infrastructure "will continue
to operate smoothly," even as Central Bank of Russia Gov. Elvira Nabiullina says
Russia's economy is facing "a totally abnormal situation."
Nabiullina said the central bank will make sure currency markets keep moving.
She also said Russia has its own financial messaging system that can replace
SWIFT in banks' operations.
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