Russia’s central bank sharply raised its key rate Monday in a desperate attempt to shore up the plummeting ruble and prevent the run of banks amid crippling Western sanctions over the Russian war in Ukraine.
The bank hiked the benchmark rate to 20% from 8.5%. That followed a Western decision Sunday to freeze Russia’s hard currency reserves, an unprecedented move that could have devastating consequences for the country’s financial stability.
It was unclear exactly what share of Russia’s estimated $640 billion hard currency coffers would be paralyzed by the decision by Western nations to block Russian banks from the SWIFT global payment system. European officials said that at least half of it will be affected.
That dramatically raised pressure on the ruble by undermining the financial authorities’ ability to conduct hard currency interventions.
The central bank ordered other measures to help banks cope with the crisis by infusing more cash into the financial system and easing restrictions for banking operations. At the same time, it temporarily barred non-residents from selling the government obligations to help ease the pressure on the ruble from panicky foreign investors trying to cash out of such investments.
The ruble sank about 30% against the U.S. dollar early Monday but steadied after the central bank’s move. It was trading at a record low 105.27 per dollar, down from about 84 per dollar late Friday.
Sanctions announced last week had taken the Russian currency to its lowest level against the dollar in history.