Russia’s central bank more than doubled the country’s main interest rate to 20 percent from 9.5 percent on Monday, as its currency, the ruble, rose againstDollarThe exchange rate hit a record low after a series of new sanctions and penalties in Europe and the United States.
Russia’s central bank said the rate hike “is intended to offset the continued depreciation of the ruble and rising inflation risks.”
The move comes after the central bank ordered a halt to foreign bids for Russian securities in an effort to curb market influence.rubleDollarIt fell to 119.50 at one point, down 30% from Friday’s (25th) closing price.
The bank also said it would release 733 billion rubles (8.78 billionDollar) of local bank reserves to increase liquidity.
The dramatic development highlights concerns about a run on Russian banks. Long queues have already emerged at ATMs in Russian cities to withdraw cash. Sberbank, part of Russia’s state-owned Sberbank, said it had “a large deposit outflow in a very short period of time”.
Meanwhile, Russia’s Ministry of Finance and Central Bank issued a statement on Monday, announcing that starting February 28, domestic exporters will be ordered to sell 80 percent of all foreign exchange earnings they receive under export contracts.
The United States, European allies and Canada agreed over the weekend to sever Russia’s main bank from SWIFT, the interbank information exchange system that connects more than 11,000 banks and financial institutions in more than 200 countries. The European Union also announced on Sunday (27th) that it would close its airspace to Russian aircraft.
The volatility in Russia’s financial markets “really shows that the Russian central bank’s assets have been frozen, a major move decided over the weekend by the European Union and other Western countries led by the United States,” David Marsh, chairman of economic policy think tank OMFIF, said on Monday.
“This is actually a lot more important than SWIFT’s decision, especially after Germany’s announcement of sanctions over the weekend,” he said, referring to sanctions that removed several Russian banks from the global SWIFT payments system.
“It does mean that Russia is going toDollarThere is a huge scramble for the bank, and long queues can now be seen outside the bank. “
Over the past few years, Russia has accumulated about 630 billionDollarChina’s foreign-exchange reserves, the highest ever, analysts say will help it fend off sanctions and lost export earnings. But if some of those assets were frozen, it would undermine Russia’s abacus.
European Commission President Ursula von der Leyen said in a statement on Sunday (27th), “We will paralyze the Russian central bank’s assets and freeze its transactions. This will make it impossible for the central bank to liquidate its assets.”
Marsh pointed out that “the Russians have no access to the $600 billion worth of money that the Russian central bank has been painstakingly building.DollarForeign reserves, the fact that we are in an emergency war economy. “And the idea of isolating Russia, which was considered unimaginable a few days ago, is now a reality.”
Punishments against Russia are also mounting as Russian troops deployed by Russian President Vladimir Putin launch an offensive across Ukraine. Major urban centers, including Kyiv and Kharkiv, Ukraine’s two largest cities, with a combined population of nearly 5 million, have come under heavy shelling and missile strikes for days.
Ukraine’s Defense Ministry said on Sunday that Ukrainian troops had so far successfully prevented a Russian offensive and continued to control the two cities.