There are indications that the Russian economy is feeling the weight of sanctions imposed by other Western countries. As an emergency measure, the Russian central bank has raised its key interest rate from 9.5% to 20%.
Russia is already facing the threat of inflation
The Central Bank of Russia (CBR) announced this in a press release today. The central bankers stated that the more than double rate hike was necessitated by profound changes in the external conditions of the Russian economy.
The board of directors of the Bank of Russia has decided to raise the key rate to 20% per annum from February 28, 2022. External conditions for the Russian economy have changed dramatically, the report said.
The CBR has put forward some expectations it has to make the switch. First, it wants to ensure that the deposit rate rises. This is to compensate for the risk of depreciation and inflation. The CBR also says that the action is necessary to ensure stability in the financial sector.
The press statement adds that further rate hikes may be forthcoming, and adds that CBR governor Elvira Nabiullina will hold a press conference later in the day.
In another press release, the CBR also ruled that brokers on the Russian currency markets are temporarily prohibited from selling “securities on behalf of non-residents”.
The move comes on the back of multiple sanctions from the US and the European Union. Russian banks are not allowed to use SWIFT, a global payment platform used by more than 11,000 banks. The Russian central bank’s foreign exchange reserves have also been frozen.
Apart from financial sanctions, the EU has imposed an air embargo on Russia and is supporting the Ukrainian army. EU member states such as Germany are also severing trade ties with Russia.
Does Russia have a way out in crypto?
There is a general unease in the crypto market that Russia may be turning to crypto as a way to circumvent international sanctions. Ukraine itself has recognized the possibility by relying on major crypto exchanges to freeze all transactions of citizens of Russia and Belarus.
While it is unclear what will happen, some crypto exchanges have noted that only a government directive can ensure that exchanges take such action. Kraken CEO Jesse Powell stated that banning normal people from using crypto was against the ethos of the industry.
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About the author
Olivia’s interests span the entire cryptocurrency and NFT and DeFi industry. She remains as fascinated with cryptocurrencies today as she was in 2017 when she first started reading about them. She is actively looking for the latest Crypto related stories. When she’s not writing, she tends to her pet Chihuahua or prepares vegan recipes. Reach me at [email protected]
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