Russian central bank doubles interest rate, ruble collapses

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Russia’s central bank announced in a statement on Monday that it will raise its benchmark interest rate by 10.5 percentage points, raising it to 20%, to face severe economic sanctions enacted by the West to punish Russia for the invasion. from Ukraine.

“The Board of Directors of the Bank of Russia has decided to increase the reference rate to 20% per annum,” said the monetary institution, quoted by Russian news agencies.

“The Bank of Russia will make further decisions on the reference rate based on the assessment of the risks associated with external and internal conditions and the response of the financial markets to these risks,” added the institution, which is trying to defend the ruble, which has depreciated sharply. since the beginning of the Russian invasion of Ukraine.

The United States, the European Union and other countries have announced that they will exclude some Russian banks from the Swift international bank payment system and from any transactions with the Russian central bank.

The Russian government will not be able to use the financial reserves it holds in the United States, the European Union, the United Kingdom and Canada, the European Commission confirmed on Sunday. In January, Russia had $630 billion in “hard” currencies or generally accepted financial assets. The measure, the most serious of the package of sanctions announced by the West against Russia’s economy, is an act of financial war, writes columnist Vinicius Torres Freire.

The ruble price collapsed on Monday against the dollar and the euro during the opening of quotations on the Moscow Stock Exchange. The Russian currency was trading at 94.15 to the dollar on Monday morning, down from 83.5 on Wednesday, the last day an official exchange rate was recorded, before the invasion of Ukraine. Against the euro, the ruble was trading at 105.43 per euro, from a previous level of 93.5.

The G7 countries – the United States, Canada, France, Germany, Italy, Japan, Britain – have warned that they will take “additional measures” on top of the already announced sanctions if Russia does not cease its military operations.

Before Western sanctions and the invasion of Ukraine, inflation was already skyrocketing in Russia, forcing the central bank to raise its benchmark rate several times over.

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