The Central Bank of Russia has increased its key interest rate to 17 percent in order to curb the inflation risks and rapid devaluation of the national currency, which hit a historic low of 64 rubles against the US dollar in Monday evening trading.
“The Bank of Russia Board of Directors decided to raise the Bank of Russia key rate to 17.00 percent per annum. This decision is aimed at limiting substantially increased ruble depreciation risks and inflation risks,” the Central Bank said in a statement on Monday night.
On Tuesday, in an effort to fortify monetary policy loans, the bank is offering to provide a floating interest rate set at the key rate level increased by 1.75 percentage points, according to the statement.
The Central Bank is also making an effort for companies to manage their foreign liquidity.
“For further expanse of credit institution ability to manage their foreign exchange liquidity it was decided to increase the maximum allotment amount for 28-day FX REPO auctions from 1.5 to 5.0 billion USD and to conduct 12-month FX REPO auctions on weekly basis,” the Central Bank said.
Photo courtesy of RIA Novosti / Kirill Kallinikov
Last Thursday, Russia increased its rate from eight percent to 10.5 percent to combat inflation, which is projected to hit 10 percent in 2014. This marked the sixth time this year that the interest rate was spiked.
The emergent move comes as Russia’s key stock indexes slid to their lowest levels since 2009 on Monday, as the currency fell to a new record low of 64 against the US dollar and 78 against the euro. Russian foreign currency reserves have now drained to a five-year low of $416 billion.
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