Russia has increased its interest rate to 17 per cent to help tackle the falling price of the rouble.
The nation's central bank announced that rates would be moving from 10.5 per cent to 17 per cent, a significant shift in the space of just 24 hours. Bank officials stated that the decision was taken to ease the continuing drop in the value of the rouble. The Russian currently has lost 50 per cent on the US dollar throughout the year.
Russia's economy has taken a significant hit in recent months as Western sanctions start to bite and oil prices continue to fall. The country relies heavily on revenues from oil exports but the drop in the price of both Brent crude and US oil has left Russia teetering on the brink of a recession. This has been highlighted with the falling rouble value.
Oil slipped once again on Tuesday (December 16th) with Brent crude falling under $60 (£38) a barrel for the first time since July 2009. Figures showed that Brent had now reached $59.75 a barrel while US crude was at $54.85. This continued fall meant that oil prices have now halved since June due to a fall in demand and increasing supplies.
This has been impacting on Russia with the rouble falling against the dollar. On Tuesday, the dollar bought 67 roubles, while the rate rise did bring it up to 58 against the US currency it has since fallen back to 62. It represents a 45 per cent drop against the dollar since the turn of the year.
Neil Shearing, chief emerging markets economists for Capital Economics, said: "The price, however, will be a further tightening of credit conditions for households and businesses and a deeper downturn in the real economy in 2015."
The central bank said that raising interest rate was aimed at limiting inflation and depreciation risks.
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