Desperation in Russia. The interest rate up to 17%! – Banker

Desperation in Russia. The interest rate up to 17%! – Banker

Central Bank of Russia surprises. At an extraordinary night
 meeting of its Executive Board decided to raise interest rates to 17%.

 

– The decision is aimed at significant risk of inhibition
 depreciation of the ruble and inflation risk – wrote the Russian central bank
 Communication published as early as the night Moscow time.

 

Recall that only five days ago, on the planned
 meeting, the CBR has decided to raise interest rates by 1 percentage point to 10.5%. The
 total this year, the Russian monetary authorities have increased the interest rates six times.
 Even before the invasion of the Ukraine, the main interest rate CBR was “only”
 5.5%. The last time Russia so sharply raised interest in 1998., When the country
 actually went bankrupt.

 

The decision to take extraordinary measures fell after
 ruble yesterday set new lows against the dollar and the euro. Just yesterday
 for the US currency had to pay close to 66 rubles and 80 rubles for Europe.
 This morning the dollar cost 61 rubles, and
 Euro 76 rubles.
 

Yesterday was also red on the Moscow stock exchange, where
 dollar-denominated RTS index lost more than 9%, and descended to the level observed for the last time in 2009.

 

Raising interest rates is not the only instrument at
 through which CBR trying to defend the ruble. Since the beginning of this year, Russia has issued on
 defend its currency to 80 billion dollars. Despite this year’s decline of the ruble
 can be compared only with the collapse of the Ukrainian hryvnia. CBR constant intervention reflect on the state of the Russian foreign exchange reserves, the status of which fell in December to 416 billion dollars, which is the lowest level in 5 years.

 

A weak ruble and Western sanctions make it in the country which are largely based on imports of basic products increasingly growing inflation. In November, the prices of goods and services increased, according to official figures up by 9.1% per annum. Sugar price has increased by 20%, meat by 18%, and fruits and vegetables by 11%. Russians do not need to wean from higher prices, because even the CBR expected inflation in the first half of next year will continue to grow and reach the double digits.

 

At the same time the Russian central bank announced today that
 increase the availability of foreign exchange to commercial banks within the 28-day transactions
 fx repo of $ 1.5 billion to $ 5 billion. It is the lack of sufficient
 access to foreign currencies by the company now spends awake at night
 monetary authorities of Russia, because even though the country itself is relatively little debt, is a big
 liabilities in foreign currencies are banks and companies from the raw materials sector.

 

Russian central bank also said yesterday that if
 next year oil prices on world markets will be on average
 $ 60 a barrel – and just costs so much now – it’s Russia’s GDP to fall by 4.5% -4.7%. If this happens,
 it will be the biggest drop since 2009.

Michael Żuławiński