Indications are that Russia’s economy is feeling the weight of sanctions placed on it by other Western countries. In an emergency move, Russia’s central bank has raised its key interest rate to 20% from 9.5%.
Russia is already facing the threat of inflation
The Central Bank of Russia (CBR) made this known in a press release today. The central bankers stated that the more than double rate hike was necessitated by severe changes in external conditions of the Russian economy.
The Bank of Russia Board of Directors decided to increase the key rate to 20% per annum from 28 February 2022. External conditions for the Russian economy have drastically changed, the notice said.
The CBR highlighted several expectations it has for making the move. For one, it aims to ensure that there is a rise in deposit rates. This is to compensate for the risk of depreciation and inflation. The CBR also says the action is needed to provide stability in the financial sector.
The press statement adds that there may be more rate hikes to come, adding that the Governor of the CBR, Elvira Nabiullina, is to hold a press briefing later today.
In another press release, the CBR also directed that brokers in Russian foreign exchange markets are temporarily banned from selling “securities at instructions of non-residents.”
The move is coming on the back of multiple sanctions from the US and the European Union. Russian banks have been banned from utilizing SWIFT, which is a global payments platform used by over 11,000 banks. The foreign reserves of Russia’s central bank have also been frozen.
Apart from financial sanctions, the EU has placed an air embargo on Russia and is supporting Ukraine’s military. EU member countries like Germany are also cutting trade ties with Russia.
Does Russia have a way out in crypto?
There has been a general unease in the crypto market that Russia may turn to crypto as a way to circumvent international sanctions. Ukraine itself has acknowledged the possibility by calling on major crypto exchanges to freeze all transactions made by citizens of Russia and Belarus.
While it is unclear what will play out, some crypto exchanges have noted that only a government directive can make exchanges carry out such an action. Jesse Powell, the CEO of Kraken, stated that banning normal people from using crypto was against the ethos of the industry.