Bank of Russia raises interest rate to 20 percent

As sanctions bite and the run on banks begins, the Bank of Russia raises the interest rate from 9.5 to 20 percent. The move, the bank hopes, will help to cushion the rouble from its slide of 30 percent against the US dollar this morning.

The slide of the rouble and the run on banks comes as sanctions begin to bite with Russian companies cut off from world financial markets and assets frozen. The value of the currency has also been badly affected by the selloff of Russian assets with many organisations and investors looking to cut their ties with the country over its invasion of the Ukraine.

Sanctions have hit the central bank hard with it being the main target with countries like the UK banning all transactions with the organisation.

A spokesperson for the UK government said: “The UK government will immediately take all necessary steps to bring into effect restrictions to prohibit any UK natural or legal persons from undertaking financial transactions involving the Central Bank of Russia, the Russian National Wealth Fund, and the Ministry of Finance of the Russian Federation.”

It is unlikely that the Bank of Russia move to raise interest rates will have the desired effect with more sanctions to come, with amongst other Switzerland speaking of introducing sanctions and freezing bank accounts.

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