Ruble crashes as central bank doubles key rate: NPR
Alexey Nikolsky/Sputnik/AFP via Getty Images
Russia’s central bank more than doubled its benchmark rate to 20%, and the ruble fell to a record low on Monday, after a weekend that brought tough new economic sanctions from the United States and the EU. ‘European Union. Punishments for Russian President Vladimir Putin’s decision to stage a full-scale invasion of Ukraine are now hampering the Russian economy.
The Central Bank of Russia is looking for ways to support the ruble. It last raised its policy rate two weeks ago to 9.5%.
Regulators kept the stock market closed on Monday to limit turbulence. The stock market would remain closed on Tuesday.
The dire economic situation is the latest sign that Russia’s military onslaught is triggering one of the country’s worst financial crises since Soviet times.
The central bank’s 20% rate is an all-time high, according to state media TASS.
Russia is now under severe sanctions, with some banks cut off from SWIFT, the global system essential for banks to conduct secure transactions. In addition to this extraordinary decision, a large part of Russia’s international currency reserves – estimated at hundreds of billions of dollars – was frozen by Western authorities.
The policy rate has risen above the highs it reached the last time Russia came under widespread economic pressure, following its illegal annexation of Crimea in 2014. The ruble’s sharp decline in value echoes this same period, as well as the financial crisis of the late 1990s.
The sharp drop in the ruble raises fears of a run on Russian banks.
“In frantic trading at the opening of markets on Monday, the ruble collapsed by at least 20%, breaking through the 100 mark against the US dollar,” Moscow time reports. “Banks and money changers around the capital were charging much higher rates for hard currency.”
Sanctions and instability compelled Putin to hold an emergency meeting with his economic advisers on Monday. Subsequently, he signed an executive order to counter what he called hostile and illegal actions by the United States and its allies, according to TASS. Details of these measures were not immediately disclosed; the Kremlin main sitewhere the executive order was posted, was unavailable for much of Monday.
Russia’s central bank insists its financial infrastructure will ‘continue to function smoothly’, even as Russia’s Central Bank Governor Elvira Nabiullina says Russia’s economy faces ‘a completely abnormal situation’ .
Nabiullina said the central bank will ensure that currency markets keep moving. She also said that Russia has its own financial messaging system which can replace SWIFT in bank operations.