Date
15 December 2017
The rouble has weakened by half against the US dollar this year. Photo: Bloomberg
The rouble has weakened by half against the US dollar this year. Photo: Bloomberg

Russia raises interest rate to 17% as rouble plunges

Russia has raised its benchmark interest rate to a hefty 17 percent from 10.5 percent.

The central bank made the announcement of the increase, the biggest since the country’s debt default in 1998, in the middle of the night in Moscow, Bloomberg reported Tuesday.

“This decision is aimed at limiting substantially increased rouble depreciation risks and inflation risks,” the bank said in a statement.

On Monday, the rouble weakened to above 60 per US dollar for the first time ever, slumping 9.7 percent to 64.4455. That extended its plunge this year to 49 percent.

It was the sixth time the central bank raised interest rates this year.

Russian President Vladimir Putin, whose invasion of Ukraine’s Crimea peninsula in March prompted sanctions from the United States and its allies, called this month for “harsh” measures to deter currency speculators.

“While such drastic tightening measures will inflict more pain on the economy, we have been arguing for a while that it is not about preventing recession but full-scale financial turmoil caused by the precipitous rouble fall,” Bloomberg quoted Piotr Matys, a currency strategist at Rabobank International in London, as saying.

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