Russia’s central bank more than doubled its key rate to 20% and the ruble fell to a record low on Monday, after a weekend that brought strict new economic sanctions from the U.S. and the European Union. The punishments for Russian President Vladimir Putin’s decision to mount a full-scale invasion of Ukraine are now hobbling Russia’s economy.
The Central Bank of Russia is grasping for ways to prop up the ruble; it last raised its key rate two weeks ago, to 9.5%.
“External conditions for the Russian economy have drastically changed,” the central bank said, citing high inflation risks and volatility as it raised the rate.
Regulators kept the stock market closed Monday to limit the turmoil. It reportedly will remain closed on Tuesday.
The economic predicament is the latest sign that Russia’s military attack is sparking one of the country’s worst financial crises since the Soviet era.
The central bank’s 20% rate is an all-time high, according to state-run Tass media.
Russia is now under severe sanctions, with certain banks cut off from SWIFT, the global system that is vital for banks to carry out secure transactions. In addition to that extraordinary move, a large chunk of Russia’s international currency reserves — estimated in the hundreds of billions of dollars — has been frozen by Western authorities.
The key rate has surpassed the heights it hit the last time Russia came under widespread economic pressure, following its illegal annexation of Crimea in 2014. The ruble’s sharp loss in value echoes that same period, as well as the financial crisis of the late 1990s.
The ruble’s steep fall has raised fears of a run on Russia’s banks.
“In frantic trading when markets opened on Monday the ruble collapsed by at least 20%, passing the 100-mark against the U.S. dollar,” The Moscow Times reports. “Banks and exchange outlets around the capital were charging much higher rates for hard currency.”
The sanctions and instability forced Russian President Vladimir Putin to hold an emergency meeting with his economic advisers on Monday. Afterward, he signed a decree to counter what he called the unfriendly and illegal actions of the U.S. and its allies, according to Tass. Details of those measures weren’t immediately disclosed; the Kremlin’s main website, where the decree was published, has been unavailable for much of Monday.
Russia’s central bank insists that its financial infrastructure “will continue to operate smoothly,” even as Bank of Russia Governor Elvira Nabiullina says Russia’s economy is currently facing “a totally abnormal situation.”
Nabiullina said the bank will make sure currency markets keep moving; she also said Russia has its own financial messaging system that can replace SWIFT in banks’ operations.