By John Meyer, financial consultant – Eurasia Business News, March 1st, 2022

The Board of Directors of the Bank of Russia decided in emergency to raise the key rate by 10.5 percentage points from February 28 to 20% per annum. This measure was taken to support financial and price stability and protect citizens’ savings in rubles from depreciation, after the powerful Western sanctions against the Russian central bank and the ban of Russia from SWIFT.

This is the historical maximum of the key rate. Prior to this, the rate of 17%, set in December 2014, was considered a record value for the Bank of Russia.

The external conditions for the Russian economy have changed dramatically. An increase in the key rate would ensure an increase in deposit rates to the levels necessary to compensate for the increased devaluation and inflation risks. This move should maintain financial and price stability and protect citizens’ savings in rubles from depreciation. The Russian ruble plunged nearly 30% against the dollar on Monday.

Further decisions on the key rate will be made based on an assessment of risks from external and internal conditions and the reaction of financial markets to them, and taking into account the actual and expected inflation dynamics relative to the target, the development of the economy over the forecast horizon, the Central Bank added.

The growth of the key rate over the past 12 monts :

March 19 – by 25 basis points, to 4.5%;

April 23 – by 50 basis points, up to 5%;

June 11 – also by 50 basis points, up to 5.5%;

July 23 – by 100 basis points, up to 6.5% ;

September 10 – by 25 basis points, up to 6.75% ;

October 22 – by 75 basis points, up to 7.5% ;

December 17 – by 100 basis points, up to 8.5% ;

February 10 – by 100 basis points, up to 9.5% ;

February 208 – by 1050 basis points, up to 20% ;

The Moscow Stock Exchange indicated before its opening that ceilings had been set – 90 rubles for one dollar and 101.19 rubles for one euro – beyond which trading would stop, a limit reached in the first seconds of the session.

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