Russia hikes rates to highest since 2003

The interest rate will increase from 9.5% to 20%, before ruble trading was due to open at 10am local time yesterday
DUBAI • The Bank of Russia raised its key interest rate to the highest in almost two decades and imposed some controls on the flow of capital in a bid to shield the economy from the impact of sweeping Western sanctions that include penalties on the regulator itself.
The interest rate will increase from 9.5% to 20%, the central bank said in a statement before ruble trading was due to open at 10am local time yesterday. It also temporarily banned brokers from selling securities held by foreigners starting yesterday on the Moscow Exchange, without specifying which securities the ban applies to. Authorities also introduced mandatory hard-currency revenues sales for exporters.
The emergency steps represent the most forceful measures taken by Russia after the latest round of sanctions, with the US and the European Union agreeing to potentially block access to much of the US$640 billion (RM2.69 trillion) the country’s central bank has built up to protect the economy.
Russia’s invasion of Ukraine has spurred a flight from the nation’s markets, and the ruble was indicated 26% weaker in offshore trading yesterday as market makers from Sydney to Hong Kong pulled back. It dropped 8% at the open on the Moscow Exchange, immediately hitting the trading limit of 90 per dollar.
S&P Global Ratings lowered Russia’s credit score below investment grade last Friday, while Moody’s Investors Service — which rates Russia one notch above junk — put the nation on review for a downgrade.
Additional measures to exclude some Russian banks from the SWIFT messaging system could further choke up the country’s banking system and the central bank announced new steps yesterday to support lenders.
The restrictions will extend to transactions on the Moscow Exchange but won’t work elsewhere, including the American depositary receipt market, according to Norvik Bank PJSC’s Mikhail Kotlov. “That’s why there will be two markets,” he said on Twitter.
The Bank of Russia is assessing whether to open other markets. If a decision to open is made, it was to be at 3pm Moscow yesterday, according to its website statement.