When Russia's Central Bank raised its base rate by one percentage point last week, it was like a doctor giving a seriously ill patient a headache tablet.
Now, it seems, the bank has reached for the defibrillator.
The 6.5 percentage point increase in the key rate to 17% is a desperate measure. But then the situation is looking increasingly desperate.
On Monday, the rouble suffered its sharpest fall in more than 15 years, losing about 10% of its value against the dollar. Moscow's RTS share index plummeted 10%.
On the streets of Moscow yesterday, there was no sign of panic, there were no queues outside banks. But the Central Bank knows it needs to bolster the national currency to prevent panic from setting in. Hence the large rise in the key interest rate.
But there is a risk. High interest rates slow economic growth, and that's not good with Russia on the verge of recession.
When Russia's Central Bank raised its base rate by one percentage point last week, it was like a doctor giving a seriously ill patient a headache tablet.
Now, it seems, the bank has reached for the defibrillator.
The 6.5 percentage point increase in the key rate to 17% is a desperate measure. But then the situation is looking increasingly desperate.
On Monday, the rouble suffered its sharpest fall in more than 15 years, losing about 10% of its value against the dollar. Moscow's RTS share index plummeted 10%.
On the streets of Moscow yesterday, there was no sign of panic, there were no queues outside banks. But the Central Bank knows it needs to bolster the national currency to prevent panic from setting in. Hence the large rise in the key interest rate.
But there is a risk. High interest rates slow economic growth, and that's not good with Russia on the verge of recession.
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