Russia Hiked Interest Rate To 20% Urging Firms To Trade Foreign Currency – Cryptovibes.com – Daily Cryptocurrency and FX News
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Summary
- Key rate raised to 20% from 9.5% by Central bank
- Move aimed at addressing rouble, inflation
- Russian companies to start selling FX
In an emergency move, the Russian central bank raised its key interest rate to 20% from 9.5% on February 28, and as the ruble tumbled to record lows, export-focused companies were told by authorities to be ready to sell foreign currency.
After President Vladimir Putin ordered his military command to put nuclear-armed forces on high alert on Sunday, the ruble hit a low of 120 to the dollar on electronic currency trading platform EBS, while the West imposed harsh sanctions against Russia.
The rate increase will bring deposit rates to levels “needed to compensate for the increased depreciation and inflation risks”, according to the central bank. The bank also said that it targets inflation at 4% and will do everything necessary to ensure that the country maintains its financial stability.
It added:
“This is needed to support financial and price stability and protect citizens’ savings from depreciation.”
After Western countries moved to block certain Russian banks’ access to the SWIFT international payment system to punish Moscow for its invasion of Ukraine, the rate was hiked to levels above the 17% mark seen in 2014 when Russia annexed Crimea from Ukraine.
Russia says its actions in Ukraine are to destroy its southern neighbor’s military capabilities and capture what it regards as dangerous nationalists but not to occupy territory, calling its actions a “special operation”.
In a statement, the central bank said:
“External conditions for the Russian economy have drastically changed.”
A briefing will be held by Central Bank Governor Elvira Nabiullina at 1300 GMT on Tuesday, the bank said.
Russian exporting companies will be ordered by the central bank and the finance ministry, in a joint decision, to sell 80% of their foreign currency revenues on the market, in another attempt to support the ruble.
As the state scrambles to manage the broadening fallout from Western sanctions, the recent moves add to a slew of measures announced since Thursday in the past week.
Brokers have also been ordered by Russian authorities to stop executing orders by foreign legal entities and individuals to sell Russian securities and suspend short selling on the Russian market.
In a note, BCS Global markets said:
“These measures may help calm down increased market nervousness, but at the same time they undermine the foundation of the monetary policy, focused on inflationary targeting and flexible exchange rate.”
“Unfavorable external environment made Russia’s monetary policy unsustainable and we do not rule out a possible rate hike going forward or further unexpected and non-market decisions.”
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