Russian central bank hikes rates amid the Ukrainian crisis

 

Russia's central bank on Monday raised its key policy rate to 20 per cent from 9.5 per cent amid the Ukrainian crisis. The western countries imposed harsh sanctions against the country, which affected the Russian economy.

The central bank also ordered companies to sell 80 per cent of their foreign currency revenues to manage the fallout of harsh economic sanctions. The West pummelled the country with economic sanctions over Russia’s invasion of Ukraine.

Reportedly, the central bank said in a statement that external conditions for the Russian economy have drastically changed after Russia invaded Ukraine. The bank further said that the rate hike from 9.5 per cent to 20 per cent will ensure a rise in deposit rates to levels needed to compensate for the increased depreciation and higher inflation.

According to Reuters, the central bank will also resume buying gold on the domestic market and ease restrictions on banks' open foreign currency positions. The Russian rouble plunged nearly 30 per cent to an all-time low versus the dollar on Monday. The rouble is the official currency of Russia. The central bank reportedly sought to ensure financial stability for Russians.

Western companies with operations in Russia and Ukraine are bracing for the potential impact of fresh sanctions after Putin announced a military operation in Ukraine https://t.co/7yT7A0zk59

— The Wall Street Journal (@WSJ) February 24, 2022

The European Union (EU) members imposed economic sanctions against Russia over the Ukraine crisis. The United States (US) imposed sanctions against two large Russian financial institutions and Russian sovereign debt. The EU imposed sanctions on five Russian banks. The US President Joe Biden also announced sanctions on the Nord Stream 2 natural gas pipeline from Russia to Germany. The Russian bank also said on Monday that customers of sanctioned banks would be unable to use their bank cards outside Russia.

According to Reuters, Russians waited in long queues outside ATMs on Sunday worrying about cash shortages. They were worried that new Western sanctions over Russia's invasion of Ukraine will disrupt payments.