Sharpest ruble crash since 1998

Russia’s central bank announces Tuesday a 6,5 percent rise in interest rates to 17 percent in a move to defend a ruble that Monday lost nearly 10 percent per dollar to 64,4.


The Bank of Russia says in a press-release issued tonight that the decision to rise the interest rate to 17 percent is aimed at limiting substantially increased ruble depreciation risks and inflation risks.

This is the sixth time this year the central bank is increasing the interest rate.

Late Monday evening, the ruble was traded at 64,44 per dollar after a fall by 6,27 during the day, Vedomosti reports. When BarentsObserver looked into the currency exhange rates early Tuesday morning one Norwegian krone was sold at a price of 8,48 rubles, one British pond was worth 100 ruble, while one Euro was 78,75 ruble.

Monday’s fall is the deepest in one day since the August 1998 ruble crisis. So far this year, the ruble has lost 49 percent to the dollar.

The ruble fall is bad news for Russians planning their Christmas vacation in Europe, but good news for foreigners scheduling a visit to Russia.

Russian media is Tuesday morning highlighting the fear that took the savings of most Russians last time in 1998.

Kommersant writes that Tuesday’s sharp increase in the interest rate make loans way more expensive and by that limits the possibilities of foreign currency exchange speculations.

The question most people ask now is what will happen to the inflation?

Prices on food products in retail chains have increased by an average of 20 to 25 percent over the last year. An even sharper increase could come after Christmas.

Quoted by TASS, CEO Andre Karpov in the Association of Companies of Retail Trade, says food and drink prices is expected to rise by another 14,5 to 15 percent.

The increase will affect not only imports, but also goods produced in Russia, as the main raw material for them or buy ingredients abroad in dollars and euros.